Democrats Suggest Defunding the CFTC’s Litigation Efforts
Democrats have decided to try to hit the CFTC in the wallet to gain some traction in the regulatory battle.
Senators Richard Blumenthal and Jeff Merkley led 15 Democratic colleagues this week in urging the Senate Appropriations Subcommittee on Financial Services and General Government to prohibit the CFTC from using federal funding to prevent states and tribes from enforcing their gambling laws against online prediction markets. The letter asks appropriators to attach a funding restriction to the CFTC’s budget, cutting off the agency’s ability to finance its ongoing litigation campaign against state regulators.
The appropriations-rider approach is tactically distinct from the earlier rounds of Democratic legislation targeting prediction markets. Bills like the STOP Corrupt Bets Act, introduced by Merkley and Representative Jamie Raskin in March, would ban event contracts on sports, elections, and government actions outright. The appropriations letter does not try to ban anything. It tries to defund the enforcement of the existing framework. That is a narrower ask, and in a different legislative lane, directed at the appropriations process rather than the authorizing committees where the earlier bills stalled.
It will not succeed, for the same reason the earlier bills did not: Republicans control both chambers, and the White House, and the Trump administration has been the most aggressive advocate for prediction markets of any administration in history. Any prediction market legislation would need to be signed by President Trump, whose appointed CFTC chairman has signaled clear support for prediction markets and has characterized the state regulatory campaigns as attempts to nullify federal law. An appropriations rider defunding the CFTC’s litigation would face the same obstacle as any standalone bill: it does not survive a Republican majority that has no interest in passing it.
The Letter is Designed to Cast a Wider Net of Constituents Interested in Regulating Prediction Markets
That does not make the letter meaningless. It makes it something different from legislation: a political positioning exercise with a longer horizon than the current Congress.
The senators’ letter frames the CFTC’s conduct as “a campaign of litigation and intimidation” that risks making the agency “an instrument and enabler of online prediction markets’ efforts to bypass states’ consumer protections.” It explicitly invokes the interests of tribes, noting that the CFTC has sued states to prevent enforcement of tribal gaming compacts alongside state gambling laws. That tribal framing is deliberate. It extends the coalition of aggrieved parties beyond blue-state attorneys general to include a constituency with significant bipartisan moral weight. It’s been reported that tribal operators may be among the most affected by prediction market event contracts.
The signatories are a clean roster of Democratic senators from states that either have active litigation with the CFTC or active gambling industries with a financial stake in the outcome: Nevada, Connecticut, Illinois, New Mexico, Colorado, Hawaii, Minnesota, California, and Rhode Island. The CFTC has sued Connecticut, Illinois, Arizona, Wisconsin, New York, Minnesota, Rhode Island, and New Mexico. There is very little daylight between the list of states that have been sued and the states whose senators signed the letter. This is constituent politics as much as it is regulatory philosophy.
Prediction Markets Have Become a Partisan Issue Riddled With Blurred Lines
In March, the landscape was significantly messier: some Republicans expressed concern about election betting, the STOP Corrupt Bets Act briefly attracted bipartisan interest for its narrower insider-trading provisions, and the administration had not fully committed its political identity to the prediction-markets cause.
That ambiguity has largely resolved. The CFTC, under Chairman Selig, has filed suit against eight states. The administration has publicly championed prediction markets as free market infrastructure. Trump family members have documented financial relationships with the major platforms. And every significant congressional action opposing prediction markets has been taken by Democrats, while Republican leadership has either supported the platforms or stayed silent.
The traditional Republican coalition contains a significant anti-gambling faction. State parties in the South and Midwest have historically opposed gambling expansion on social conservative grounds. The states’ rights argument against federal preemption of state gambling laws is also structurally Republican: it is precisely the kind of federalism argument that conservative legal theory has championed for decades.
A Kalshi spokesperson argued that banning sports contracts would push the behavior offshore, where no regulation exists, which is a libertarian-leaning argument that maps well onto one strand of Republican thinking. But it sits uneasily alongside the states’ rights argument that the same party has used to resist federal overreach in other contexts.
That tension is not currently creating Republican opposition to prediction markets because the Trump administration has made them a priority, and Republican legislators are not inclined to break with the administration on a niche financial regulatory question. The calculus could look different after the 2026 midterms, particularly if Democrats make gains and prediction markets have become a more visible issue in key states. It could look different again in 2028, when a Republican primary field without Trump on the ballot might find room to distinguish itself on exactly the kind of socially conservative, states’ rights issue that prediction-market opposition represents.
The Blumenthal-Merkley letter will not defund the CFTC’s litigation. What it is building, one letter and one stalled bill at a time, is the legislative record and rhetorical infrastructure for a Democratic position that is coherent, consistent, and ready to be activated when the political environment changes. Whether that happens before or after the Sixth Circuit resolves the underlying legal question on July 30 is a separate matter. The political argument is being constructed regardless.
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