The U.S. Commodity Futures Trading Commission (CFTC) will host a public roundtable to review its regulatory stance on prediction markets in the coming weeks. The discussions, which follow the agency’s recent request for information on sports-related event contracts, aim to gather insights from market participants, legal experts, and industry stakeholders.
The roundtable will explore the legality of event contracts under the Commodity Exchange Act, potential regulatory adjustments, and consumer protection measures, the CFTC stated on Wednesday.
Acting Chairman Caroline D. Pham criticized the commission’s previous regulatory stance, calling it a “sinkhole of legal uncertainty” that has stifled innovation. Pham emphasized the need for a forward-thinking approach that balances market oversight with consumer protections.
“Unfortunately, the undue delay and anti-innovation policies of the past several years have severely restricted the CFTC’s ability to pivot to common-sense regulation of prediction markets,” she said.
Under the Biden administration, the CFTC increased scrutiny of event contracts and unregistered platforms, with former Chair Rostin Behnam expanding oversight of crypto derivatives and decentralized finance (DeFi). This regulatory crackdown has affected companies such as Kalshi and Polymarket.
Kalshi, a designated contract market regulated by the CFTC, saw its proposal for election-related contracts rejected in 2023. Polymarket, which operates on Ethereum, was fined $1.4 million in 2022 for offering unregistered swaps.
Prediction markets have gained traction as tools for assessing probabilities on various events, particularly during the 2024 U.S. presidential election cycle. Polymarket saw significant trading volume as traders speculated on Donald Trump’s Republican nomination and eventual presidential victory. The platform became a barometer of public sentiment, with users reacting swiftly to polling shifts, legal developments, and endorsements.
Polymarket’s CEO, Shayne Coplan, was subject to a law enforcement raid on November 14, with authorities seizing his phone and electronics. A spokesperson at the time described the raid as “political retribution,” alleging that Coplan was targeted after Polymarket users accurately predicted Trump’s win.
With Trump now in office, Pham sees prediction markets as a “new frontier” for harnessing market sentiment to improve forecasting accuracy. The CFTC roundtable will be held at its Washington, D.C., headquarters, with additional details to be announced. Public comments and participation requests are due by February 21, the regulator confirmed.
Editorial Note: This news article has been written with assistance from AI. Edited & fact-checked by Harshajit Sarmah.
