The Commodity Futures Trading Commission (CFTC) cancelled a series of roundtable discussions on prediction markets for later this week. The federal regulator has been silent on the reason for the cancellation, which blindsided attendees who were ready for these chats, with travel booked and set.
Attendees were desperate to discuss balanced regulation of prediction markets at these roundtable discussions. Now it seems no discussions will be had, allowing prediction markets like Kalshi, Robinhood, and Crypto.com to operate in peace.
Why Does This Matter?
Prediction markets have been a hot topic in the regulated world since Kalshi offered event contracts on the US Presidential Election, but the attention paid to prediction markets hit a new level of scrutiny when they offered sports event contracts.
States such as Illinois, Maryland, Montana, Nevada, New Jersey, and Ohio have filed cease-and-desist letters to operators like Kalshi, Crypto.com, and Robinhood, believing sports event contracts are nothing more than sports gambling.
Ohio Casino Control Commission's Executive Director Mathieu Schuler stated: "Purchasing a contract based on which team a person thinks will win a sports event is no different than placing a bet through a traditional sportsbook."
Kalshi has countered these cease-and-desist letters with lawsuits. So far, two lawsuits have returned in their favor, with circuit courts in New Jersey both deciding they did not have the jurisdiction to rule in this case, as Kalshi was a CFTC-regulated entity. Only the federal regulator could order them to cease offering sports event contracts.
State regulators were looking forward to these roundtable discussions to plead their case directly to the CFTC. This decision is a huge win for prediction markets.
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CFTC Leadership Pro-Prediction Markets
Back on February 5, acting CFTC Chair Caroline Pham announced the roundtable discussions, but perhaps we should have seen the writing on the wall.
In Pham's press release on the roundtables, she stated: "Despite my repeated dissents and other objections since 2022, the current Commission interpretations regarding event contracts are a sinkhole of legal uncertainty and an inappropriate constraint on the new istration. Prediction markets are an important new frontier in harnessing the power of markets to assess sentiment to determine probabilities that can bring truth to the Information Age. The CFTC must break with its past hostility to innovation and take a forward-looking approach to the possibilities of the future."
Pham is not the only one at the CFTC who is pro-prediction market. In February, Donald Trump named Brian Quentenz as his candidate to lead the CFTC. Quentenz is currently on the board of directors at Kalshi. Perhaps he'll step down from said position once he is confirmed as CFTC chair, but he's pro-prediction market leanings cannot be denied.
Look, of course, Pham's statement or Quentenz's current role at Kalshi does not indicate they'd cancel the roundtables, but in the absence of a reason from the CFTC for cancelling these roundtables, Pham and Quentenz's positions offer a compelling reason.
