I noticed an interesting development in the dispute between crypto platforms and U.S. regulators. This time, it’s about prediction markets and who should actually oversee them—federal authorities or the states.

One major platform launched prediction markets in partnership with Kalshi, but several states (Connecticut, Illinois, Michigan, Nevada) began sending cease-and-desist letters, arguing that this is essentially illegal gambling. The platform filed lawsuits, seeking clarity in federal court.

The platform’s general counsel delivered a scathing critique, calling the states’ position outright gaslighting. His argument was that the states supposedly claim that the CFTC cannot effectively regulate such markets due to limited resources. But this is clear gaslighting, because the Commodity Futures Trading Commission has been overseeing multi-trillion-dollar derivatives markets for decades and regularly prosecutes insider trading in event contracts.

At the heart of the dispute is the question of jurisdiction. Under the Law on Commodity Exchange, the CFTC has exclusive authority over swaps and derivatives, including event contracts. There is even a special rule that allows the federal commission—not the states—to ban such contracts for policy reasons. The states are trying to exclude sports betting contracts from the federal definition, but, according to the platform, that doesn’t align with either the text of the law or judicial practice.

The key distinction being emphasized here is that exchange-traded contracts are not the same as bookmaker bets. On a specialized exchange like Kalshi, buyers and sellers themselves set prices, and this happens under CFTC oversight. In traditional bookmaker shops, operators themselves set the odds and take the opposite side. This is a completely different structure, and no one is saying that the CFTC should regulate bookmaker shops.

For the most part, this reflects a broader conflict in the crypto space over fragmented oversight. The states retain rights to protect consumers and fight fraud, and that’s fair. But when national derivatives markets are subject to a patchwork of 50 different regulators, it undermines trust and stability. Congress has long chosen a unified federal model for derivatives, and prediction markets should operate under the same principle. The gaslighting is that the states make it seem like they’re protecting consumers, but in reality they are creating regulatory chaos.