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Coinpaprika 2025-02-06 08:37:17

CFTC to Reevaluate Prediction Market Rules, Impacting Kalshi & Polymarket

The US Commodity Futures Trading Commission (CFTC) has announced a public roundtable to review how prediction markets should be regulated. This decision could impact platforms like Kalshi and Polymarket . The agency recently asked for public input on event contracts, signaling a shift in its approach. Acting CFTC Chair Caroline D. Pham, who stepped in after Rostin Behnam’s resignation, has strongly criticized the previous regulatory stance. She called it a “legal sinkhole” that has slowed down innovation in prediction markets. The discussions at the roundtable will focus on how event contracts fit within the Commodity Exchange Act, as well as consumer protection and possible regulatory changes. Pham has stated that years of delays and anti-innovation policies have made it difficult for the CFTC to adopt a more logical approach to prediction market regulation. The event, which will take place at the CFTC’s Washington, D.C. headquarters, will allow stakeholders to voice concerns and suggest changes. The deadline for public comments and participation requests is February 21 . This review comes amid the CFTC’s tougher stance on event contracts and unregistered platforms under the Biden administration. Behnam, the former chair, expanded oversight of crypto derivatives and decentralized finance (DeFi). Kalshi, a CFTC-regulated market, has faced hurdles, such as the agency blocking its proposal for election-related contracts. Polymarket, a blockchain-based prediction platform, was fined $1.4 million for offering unregistered swaps. When the CFTC moved against Kalshi five months ago, Polymarket saw a 40% drop in activity , showing how regulations can directly affect the industry. The CFTC has also investigated major crypto firms. It subpoenaed Coinbase four weeks ago as part of an inquiry into Polymarket. The FBI even seized Polymarket CEO Shayne Coplan’s devices after the platform’s success in election betting. These actions show the agency’s determination to enforce compliance in the growing prediction market sector. The CFTC has also reviewed sports betting contracts, including those from Crypto.com related to the Super Bowl. Before that, the commission pressured Robinhood to stop launching similar betting products. Sports betting journalist Geoff Zochodne commented that while the CFTC claims to have identified key regulatory challenges, its approach seems to be broad and unclear. Despite regulatory pressure, prediction markets have defenders. Ethereum co-founder Vitalik Buterin argues that calling them “gambling” is incorrect. He says they serve as a tool for public knowledge, helping people understand the likelihood of certain events and their significance. Even if the CFTC finds a fair way to regulate Polymarket, legal challenges remain worldwide. Thailand recently announced restrictions on crypto-based betting. Singapore and France are also taking action against prediction markets, showing that regulatory concerns are not limited to the US. This roundtable comes shortly after the CFTC announced discussions on crypto market structures, showing a wider effort to engage with stakeholders on digital asset regulation. The outcome of these discussions could significantly shape the future of prediction markets, as regulators seek a balance between consumer protection and industry innovation.

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