CFTC chair hails prediction markets “an important new frontier” ahead of roundtable debate
Caroline D Pham’s comments come as derivatives regulator outlines discussion with a “wide variety” of stakeholders over its approach to sports-related event contracts
The Commodity Futures Trading Commission (CFTC) has announced it will conduct a public roundtable on sports event contracts to inform its approach on regulating the “important new frontier” of prediction markets.
Scheduled for around 45 days’ time, the CFTC will host discussions at its Washington DC headquarters with the aim of developing a “a robust administrative record with studies, data, expert reports, and public input from a wide variety of stakeholder groups.”
The roundtable has been confirmed after the regulator highlighted several obstacles to the “balanced regulation of prediction markets.”
These hurdles include existing CFTC rules, previous court orders, tribal sovereignty, federal sports betting laws, and existing regulations around contract markets.
Recently appointed acting chair Caroline D Pham said the action being taken by the CFTC would allow the event contracts space to step out of various constraints and explore future possibilities.
Pham had previously criticised the CFTC’s stance on event contracts, labelling it as an “inappropriate constraint.”
Pham explained: “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.
“Despite my repeated dissents and other objections since 2022, the current commission interpretations regarding event contracts are a sinkhole of legal uncertainty and an inappropriate constraint on the new administration.
“Prediction markets are an important new frontier in harnessing the power of markets to assess sentiment to determine probabilities that can bring truth to the Information Age.
“The CFTC must break with its past hostility to innovation and take a forward-looking approach to the possibilities of the future.”
Pham continued: “As the preeminent federal regulator mandated to oversee the $400tn notional derivatives markets that drive the real economy and safeguard the public interest, the CFTC is required to follow the rule of law and the Administrative Procedure Act to change course.
“This roundtable is a necessary first step in order to establish a holistic regulatory framework that will both foster thriving prediction markets and protect retail customers from binary options fraud such as deceptive and abusive marketing and sales practices.
“The CFTC appreciates the proactive engagement from market participants and looks forward to working together to support innovation while ensuring robust customer protection in our markets.”
Members of the public have been encouraged to contribute to the roundtables either as panellists or via email, with key stakeholders and experts also expected to take part.
Crypto.com announced the rollout of sports event trading contracts on 23 December, before the CFTC requested a suspension of the offering pending a 90-day review.
However, the request was subsequently rejected by the Singapore-based crypto exchange, which has avoided using bets or wagers in the language around the product.
Soon after, prediction markets platform Kalshi followed suit, launching sports event contracts in preparation for the upcoming Super Bowl, as well as several other major US sports events.
As with Crypto.com, Kalshi’s sports event contracts are accessible in all 50 US states to users over the age of 18.
Brokerage firm Robinhood became the most recent high-profile platform to launch sports event contracts for the Super Bowl, on Monday, 3 February, only to pull the product less than 24 hours later at the request of the CFTC.
Having tapped Kalshi to provide the contracts for its Robinhood Derivatives arm, the CFTC formally requested the firm to “not permit customers to access” sports event contracts.
Unlike Crypto.com, Robinhood complied, noting: “We are disappointed by this outcome, especially given that we had been in regular communication with the CFTC about our intent and plans to offer this product.
“We’ve also taken steps to advocate for balanced regulation in the futures and derivatives markets, including participating directly in a CFTC roundtable, providing written feedback to the CFTC and generally championing the economic benefits of event contracts.
“[We] will continue to collaborate with the CFTC as we work to roll out a more comprehensive event contracts platform later this year.”