Michael Selig, Chairman of the U.S. Commodity Future Trading Commission (CFTC) announced the plans to regulate prediction markets, asserting the agency to have a clarity over the agency’s jurisdiction over event contracts.
CFTC moves to establish regulatory framework
CFTC plans to formulate rules and regulations to govern the prediction markets after the Nevada and Tennessee cases against prediction markets clash.
Speaking at the Milken Institute Future of Finance event on Tuesday, Selig claimed that the CFTC will not just stick to their proactive role of overseeing prediction markets but also build a regulatory framework to govern them.
“We’re going to be setting very clear standards as to what can be self-certified in our markets and what cannot, as well as how to evaluate the different products that are offered in the space,” Selig said.
Advance Notice of Proposed Rulemaking (ANPRM) will open doors for public opinions to help lay the grounds for the enforceable regulations. The decision is made with clear boundaries of operations in mind for permissible event contracts rather than individual litigation.
Gambling vs. derivative could define prediction markets
The decision met with criticism and discussions. Mick Mulvaney, former White House chief of staff, called contracts bought on prediction markets the same as “gambling.”
“The simple answer is that it’s gambling. It just is,” Mulvaney said to the media, adding that the growing industry needs closer oversight following betting activity ahead of the Iran war.
CFTC filed an ‘amicus brief’ in February to support Crypto.com in its legal battle against the state of Nevada. The case circulated around the ‘sports prediction contracts’ offered by Crypto.com, which the Nevada Gaming Control Board labeled ‘illegal gambling, accusing the state of exceeding its authority.
After a district judge initially sided with Nevada, the case is currently under appeal at the Ninth Circuit Court of Appeals. The brief offered a clear federal defense for prediction market operators facing potential enforcement action from the states.
The future of the prediction platform
The future of the following discussion has the potential to completely change how the CFTC looks at self-certified contracts and what exactly makes an event product a derivative or a gambling instrument.
