An assortment of trade groups has inserted itself into the discussion around prediction markets offering event contracts by writing to the Commodity Futures Trading Commission (CFTC).
Fifteen free-market organizations jointly sent a letter to the CFTC on Wednesday to urge the federal derivatives regulator to verify that prediction market operators have the right to offer contracts on elections and other current events.
The signees of the letter were:
- Americans for Tax Reform
- Shareholder Advocacy Forum
- 60 Plus Association
- American Association of Senior Citizens
- American Commitment
- Americans for Limited Government
- Center for Freedom and Prosperity
- Center for a Free Economy
- Center for Individual Freedom
- The Committee for Justice
- The Competitive Enterprise Institute
- Frontiers of Freedom
- Institute for Liberty
- Market Institute
- Southwest Public Policy Institute
“As leaders of conservative and free-market groups, we believe that government should not stand in the way of innovative information services,” wrote the loose coalition, which hooked its argument mostly on the “solid performance” of prediction markets in forecasting the results of the 2024 presidential election.
“We ask that, in contrast to the CFTC under the Biden administration, the CFTC in this new administration adopt a policy of permissionless innovation toward prediction market venues,” wrote the authors. That, they claimed, would stand in stark and needed contrast to the Biden administration’s pursuit of “weaponized regulation against prediction market venues.”
“We believe that to fully reverse the Biden CFTC’s damage, the CFTC must affirm now that prediction markets dealing with elections and other current events are allowable as futures trading venues under federal law,” added the groups.
Event contracts ‘almost always permissible’
The letter also noted that the groups agree with Brian Quintenz, President Trump’s nominee to be the next chair of the CFTC, who has asserted that event contracts offered by prediction markets are “almost always” authorized under the federal Commodities Exchange Act.
Prediction markets are fundamentally different from casinos, argued the authors, in that prices of markets are set by buyers and sellers rather than by a casino or sportsbook, as in against-the-house gambling.
“Regarding sports outcome contracts increasingly being offered by prediction markets, small firms affected by the performance of a team in a game or a season can buy prediction market contracts to manage effects on their sales of sports-related products or services,” added the letter. “As Quintenz notes, ‘contracts relating to the outcome of sporting events could now have a legitimate economic and hedging purpose for businesses.'”
“We therefore respectfully request that the CFTC issue a policy statement stating two things. First, that event contracts offered on prediction markets are subject to the exclusive jurisdiction of the CFTC. And second, that the CFTC will police behavior of prediction market venues but will not restrict the subject matter of the event contracts offered by the venues.”
The opinions keep coming
More than 40 parties have now written to the CFTC to express their views on prediction markets. While the focus has not always been on sports contracts in particular, that has certainly been a central piece of the puzzle. Those have ranged from trade groups to major sports leagues, sportsbooks, tribal gaming associations, state gaming regulators, lawmakers and more.
In the last week alone, data and integrity firm Genius Sports wrote that it supports prediction markets offering sporting event contracts as long as the CFTC implements stringent integrity protections, while the Arizona Department of Gaming (ADG) criticized the federal regulator for turning a blind eye to what it alleges constitutes illegal gambling.
