CFTC Prediction Market Proposal Now Receiving Fierce Opposition From the Crypto Industry

Key Points:

• The CFTC prediction market proposal is receiving strong opposition from major crypto and fintech firms.
• Critics argue the rule’s broad definition of “gaming” improperly restricts event contracts and conflates speculation with gambling.

A proposed rule change by the U.S. Commodity Futures Trading Commission threatens to upend nascent political prediction markets such as Polymarket and has engendered fierce pushback from some of the biggest names in cryptocurrency and financial technology.

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CFTC Rule Change Draws Backlash From Crypto, Fintech CEOs

The CFTC prediction market proposal has received criticism from industry leaders such as Gemini, Crypto.com, Robinhood, and Coinbase, and prominent individuals like blogger Scott Alexander. Their argument was that the CFTC’s plan overstepped its regulatory mandate because it is neither a gambling authority nor an election regulator. The CFTC was not qualified to police such markets, said Steve Humenik, senior vice president at Crypto.com.

In an extensive letter, Coinbase expressed its concern that the unduly broad CFTC definition of “gaming” inappropriately restricted event contracts without first examining their public interest. The exchange is arguing that the rule would classify something under the CFTC as gaming that is a legitimate contract—for instance, those used to hedge costs in sports events—which they claim doesn’t square up to legislative definitions of gambling.

Coinbase has since trashed the CFTC prediction market proposal due to a perceived confusion between speculation and gambling while failing to draw a line between pure gambling and market speculation. As per the exchange, the definition of the new rule misclassifies processes such as elections or awards.

Industry Leaders Demand Revision in CFTC Prediction Market Proposal

The backlash resonates across the broader crypto and fintech community, as Gemini co-founder Cameron Winklevoss implores the CFTC to rescind the proposal so that it can work with industry experts toward a revised approach. Winklevoss stressed that the CFTC prediction market proposal is reducing American access to very useful markets.

Concerns were reflected in the comment by the legal team of Dragonfly Capital, which said recent Supreme Court rulings make clear that the CFTC must have a factual basis to support its assertion of regulatory authority over such contracts.

More broadly, cryptocurrency companies say that, if applied, this proposed rule would severely infringe on the rights of citizens to interact with event-commodity prediction markets; therefore, the CFTC needs to rethink its approach.