The chairman of the CFTC, Michael Selig, supported prediction markets paired with blockchain technology, stating that they can become a powerful tool for discovering the truth.
On Monday at the FIA Cleared Markets World Conference in Boca Raton, Florida, Selig said that prediction markets, also known as event contracts, can provide valuable signals about future events when participants put money behind their opinions, describing well-functioning markets as “real machines.”
“When participants express opinions about future events and back those opinions with capital — they create accountability, transparency and information,” Selig said. He added that highly liquid prediction markets often generate signals that people find more reliable than traditional opinion polls.
“The reality is that the public now believes that market prediction platforms are more accurate than political polls,” Selig said, pointing to the 2024 US presidential election as an example of market pricing taking over the outcome scale.
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US states take legal action against prediction markets
Selig’s support for the prediction markets comes as several US states have taken legal or regulatory action against the platforms, saying their event-based contracts are akin to unlicensed gambling.
Last week, two US federal court rulings allowed Nevada regulators to proceed with legal action against market prediction platforms Polymarket and Kalshi. In February, the state sued Kalshi after the prediction market company lost its lawsuit to stop the state regulator from taking action on its sports prediction markets.
Massachusetts also took action, suing Kalshi over sports betting contracts to residents. Connecticut regulators, meanwhile, sent Kalshi and Robinhod cease-and-desist letters, ordering them to stop offering certain sports performance contracts.
The CFTC chairman said the agency plans to provide clearer rules on how event contracts can be listed and traded within the regulatory framework. He said staff have been directed to develop guidelines on how these markets should operate and comply with existing derivatives laws.
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The CFTC is planning a clearer classification of crypto assets
Selig also said the CFTC plans to pursue a crypto asset classification framework and guide how the rules apply to developers of non-custodial software such as digital wallets and decentralized finance applications.
He argued that the agency should focus on clear legislation instead of a policy of uncertainty and enforcement first, claiming that “America is now the crypto capital of the world.”
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