Prediction markets have emerged as a novel asset class where investors may “bet” on the outcome of events. While somewhat similar to traditional securities markets, these platforms are not regulated by securities regulators but fall under the purview of the Commodity Futures Trading Commission (CFTC), but the regulatory environment is a bit gray. Well-known platforms include Polymarket and Kalshi, among others. At times, these prediction markets have been accurate in their predictions of specific outcomes, such as the recent Presidential election.
The Competitive Enterprise Institute (CEI) has issued a statement calling for the “reversal of the Biden administration CFTC’s weaponized regulation against prediction market venues,” requesting that these platforms be allowed as futures trading venues under federal law.
In a letter signed by 15 free market organizations, the missive demanded that the CFTC affirm:
- Event contracts offered on prediction markets are subject to the exclusive jurisdiction of the CFTC.
- The CFTC will police the behavior of prediction market venues but not restrict the subject matter of the event contracts offered by the venues.
The letter adds:
“The Biden administration CFTC pursued weaponized regulation against prediction market venues, even attempting to ban an election market exchange that had been approved by the CFTC under the Obama administration back in 2014. Fortunately, this and other attempts to ban prediction markets were thwarted by federal courts that correctly found the CFTC had exceeded the law. But we believe that to fully reverse the Biden CFTC’s damage, the CFTC must affirm now that prediction markets dealing with elections and other current events are allowable as futures trading venues under federal law.”
John Berlau, Director of Finance Policy at CEI, said
“We hope the CFTC will take this scholarly research and the sentiments of our groups seriously and allow all Americans access to the promising innovation of prediction markets.”
The letter affirms its belief that fraudsters and other transgressions must be punished similarly to traditional markets.