The White House completed its review of the Commodity Futures Trading Commission's (CFTC) proposed prediction markets framework last Friday, according to the Office of Information and Regulatory Affairs (OIRA) website. The completion clears the way for CFTC to release its draft rule for a second round of public comment. The review follows an initial March consultation where legal experts, prediction market platforms, and venture firms including a16z submitted arguments supporting CFTC as the sole regulatory authority for the sector.
CFTC Draft Rule Advances to Second Public Comment Phase
The regulator's proposed draft rule on prediction markets will soon enter a second round of public comment. The first review in March was designed to gather information on how to formulate the framework. Following the upcoming public feedback window on the draft proposal, CFTC will make tweaks based on received input before sending the revised draft back to the White House for review. The agency commissioners will then vote on the framework before it can become formal law.
Stakeholders Argued for CFTC Sole Authority in March Submissions
During the March consultation stage, several legal experts, prediction markets, and venture firms including a16z made submissions arguing for CFTC to maintain sole authority in the sector. According to a16z, without CFTC as the sole authority, the segment will have fragmented liquidity, and its use case as forecasting and risk management tools won't be effective. CFTC crafted the draft policy framework based on information gathered during this first stage of public comment.
States Challenge CFTC Jurisdiction Over Prediction Markets
The push for clear rules has intensified amid CFTC's legal fight with states for jurisdiction in the segment. States like Minnesota view prediction markets as gambling sites and have recently banned them. Other states have taken a similar strict stance, but CFTC has moved to block their actions. Sports betting firms have called the platforms '100% gambling sites' and have been calling for strict regulations. President Donald Trump has backed CFTC for sole oversight of the sector, calling it a 'major industry.'
Legal Expert Warns of Potential Lawsuits Against Framework
Daniel Wallach, a sports betting and gaming lawyer, warned that traditional players will file lawsuits against the agency if the framework is formalized as law. According to Wallach, rivals could move to court to block CFTC from implementing the final prediction markets guidelines through APA lawsuits.
Prediction Markets Reached $25 Billion Monthly Volume in May
The segment is now a multi-billion-dollar industry. The sector hit a new record monthly trading volume of $25 billion in May.
FAQ
What did the White House complete last Friday regarding prediction markets?
The White House finished its review of the CFTC's proposed prediction markets framework last Friday, according to the OIRA website. This completion allows CFTC to release its draft rule for a second round of public comment.
Why are states challenging CFTC's authority over prediction markets?
States like Minnesota view prediction markets as gambling sites and have banned them. Sports betting firms have also called the platforms '100% gambling sites' and are pushing for strict regulations, leading to legal conflicts with CFTC over jurisdiction in the sector.
