The US Commodity Futures Trading Commission (CFTC) is holding a public roundtable to discuss the regulation of prediction markets. This could affect platforms like Kalshi and Polymarket. The CFTC has recently sought public input on event contracts, indicating a change in its regulatory approach.
Acting CFTC Chair Caroline D. Pham criticized the previous regulatory framework, calling it a “legal sinkhole” that hindered innovation in prediction markets. The roundtable will explore how event contracts align with the Commodity Exchange Act, focusing on consumer protection and potential regulatory changes.
Pham noted that delays and anti-innovation policies have made it hard for the CFTC to regulate prediction markets effectively. The roundtable will take place at the CFTC’s headquarters in Washington, D.C., allowing stakeholders to express their concerns and suggest improvements. The deadline for public comments is February 21.
This review comes as the CFTC takes a tougher stance on event contracts and unregistered platforms under the Biden administration. The former chair, Rostin Behnam, expanded oversight of crypto derivatives and decentralized finance (DeFi). Kalshi, which is regulated by the CFTC, faced challenges when the agency blocked its proposal for election-related contracts. Meanwhile, Polymarket was fined $1.4 million for offering unregistered swaps. Following the CFTC’s actions against Kalshi, Polymarket experienced a 40% drop in activity, highlighting the impact of regulations.
The CFTC has also investigated major crypto firms, including a recent subpoena of Coinbase related to Polymarket. The FBI seized devices from Polymarket’s CEO, showing the agency’s commitment to enforcing compliance in the prediction market sector.
The CFTC is also reviewing sports betting contracts, including those from Crypto.com. Despite regulatory pressures, some, like Ethereum co-founder Vitalik Buterin, argue that prediction markets are not gambling but tools for public knowledge.
Even if the CFTC finds a fair way to regulate Polymarket, global legal challenges remain. Countries like Thailand, Singapore, and France are also taking action against prediction markets, indicating that regulatory concerns extend beyond the US. This roundtable is part of a broader effort by the CFTC to engage with stakeholders on digital asset regulation, which could shape the future of prediction markets.
