Coalition urges Commodity Futures Trading Commission cut red tape on prediction markets

The Competitive Enterprise Institute today sent a coalition letter to the Commodity Futures Trading Commission (CFTC) urging it to adopt a policy of permissionless innovation toward the promising growth of prediction markets.

Signed by leaders of 15 conservative and free-market organizations, including CEI, Americans for Tax Reform, and the Shareholder Advocacy Forum, the letter calls for a reversal of the Biden administration CFTC’s “weaponized regulation against prediction market venues” and a policy statement affirming that prediction markets dealing with elections, sports, and other current events are allowable as futures trading venues under federal law.

The letter points out that “the solid performance of prediction markets in forecasting the results of the 2024 presidential election” shows the “potential for prediction markets to disseminate practical information to Americans on political, cultural and economic trends that can help them better plan their futures.” Noting that “prices of contracts on prediction markets are set by buyers and sellers,” as they are in longstanding futures exchanges, the letter observes that prediction markets enable individuals and businesses to hedge risks of events just as traditional futures markets do.

The letter requests the CFTC issue a policy statement stating:

• Event contracts offered on prediction markets are subject to the exclusive jurisdiction of the CFTC.
• The CFTC will police behavior of prediction market venues but not restrict the subject matter of the event contracts offered by the venues.

John Berlau, CEI’s Director of Finance policy and a signatory of the letter, notes that “scholars across ideological lines have argued that prediction markets are essential in providing real-time information to businesses, policy makers, and ordinary citizens.” Berlau adds, “We hope the CFTC will take this scholarly research and the sentiments of our groups seriously and allow all Americans access to the promising innovation of prediction markets.”

View the letter on cei.org

Related analysis: Let prediction markets predict – elections, sports, and other topics