In a time of uncertainty and anticipation, the nomination for the new chair of the U.S. Commodity Futures Trading Commission (CFTC) remains in limbo. Brian Quintenz, previously tapped by the White House to lead the federal regulatory body overseeing derivatives, finds his nomination at a standstill. This delay is influenced by prominent figures such as the Winklevoss Twins, who have urged a pause in the process. If the nomination for Quintenz, a former CFTC commissioner with ties to Kalshi, is ultimately passed over, it could signify a substantial setback for supporters of prediction markets. Quintenz has been a strong proponent of classifying sports event contracts under federal jurisdiction rather than leaving them to individual states.
As a critical roundtable on cryptocurrency and prediction market regulation approaches next Monday, the speculation grows. Last week, reports surfaced indicating that U.S. President Donald Trump is considering alternative candidates for the position, provoking a wave of questions: Who will be the next CFTC chair?
One potential candidate drawing attention is Josh Sterling, a partner at the Washington D.C.-based firm Milbank LLP. Sterling, vetted by Trump’s administration, is not the favored choice among prediction market skeptics. His history with Kalshi, representing them in key legal battles, marks him as a controversial figure. At his previous firm, Jones Day, Sterling defended Kalshi in the notable case of KalshiEx LLC v. CFTC, arguing against the prohibition of Congressional Control Contracts by the derivatives regulator. These contracts allowed users to predict political outcomes, such as which party would control the Senate and House after the 2024 elections. Kalshi’s eventual legal success led to the platform offering contracts on the presidential election and sports events.
In July, Sterling represented Kalshi at the National Council of Legislators From Gaming States summer meeting in Louisville. There, he shared his perspective that courts should not decide if market participants are using contracts for speculation or hedging. Sterling also likened sports contracts to derivatives like WTI oil futures, pointing out that no state has yet regulated wheat derivatives. “How many contracts depend on events—oil, wheat, interest rates, or foreign exchange rates?” he remarked, emphasizing the broad industry implications beyond specific events.
Sterling’s potential appointment as CFTC chair would likely be seen as advantageous for prediction markets. He brings experience from his tenure as an agency director, overseeing about 3,300 financial firms registered with the CFTC globally. During his leadership from 2019 to 2021, he expanded the agency’s oversight and enforcement programs, completing over 60 major rule and relief initiatives.
However, Sterling is not the only candidate under consideration. There’s a focus on individuals experienced in cryptocurrency matters. Mike Selig, for instance, has more limited expertise in prediction market regulation compared to Sterling. Appointed as the chief counsel of the SEC’s newly formed Crypto Task Force in March, Selig has been tasked with crafting solutions to complex crypto regulatory challenges. Before his SEC tenure, Selig worked as a partner at the international law firm Willkie Farr & Gallagher. As a protégé of former CFTC chair Chris Giancarlo, Selig was praised for his appointment, and his role at the SEC aligns with his past involvement in discussions on leveraged trading as futures contracts.
Selig’s history includes writing a 2022 memo about retail commodity transactions, asserting the need for designated contract markets if no exceptions apply. In CFTC language, this translates to prediction markets. Those opposing prediction markets would likely prefer Selig over Sterling.
Moreover, there’s interest in candidates from the crypto sector, like Williams. Appointed by the Treasury Department in February as a counselor on digital assets and blockchain technology, Williams previously served as global head of policy at Galaxy Digital. His views on prediction markets remain largely uncharted. In recent discussions, including one with FIA Market Voice and another with blockchain intelligence firm TRM, Williams focused on stablecoins and digital assets without delving into prediction markets.
Recently, another potential candidate emerged from a blog by a crypto law firm. Veronica Irwin wrote that SEC Chairman Paul Atkins is considered “first in line” for the CFTC chair position. However, such an appointment under the Securities Exchange Act would be unprecedented, as no commissioner is allowed to engage in other business endeavors.
As the CFTC awaits its new leader, interim chair Caroline Pham has declared her intentions to depart once a successor is named. Former President Joe Biden appointed Pham to the commission in 2021, and her eventual replacement will undoubtedly shape the future of both the CFTC and the broader industry it regulates. The outcome of this appointment could hinge on the direction the administration wants to take regarding prediction markets and the rapidly evolving landscape of digital assets. The decision will echo through the regulatory framework, influencing not only financial institutions but also the burgeoning sectors of prediction markets and cryptocurrency.
Topics: Prediction Markets · Crypto Gambling · Gambling Regulation · Enforcement
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