The Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) will hold a joint roundtable this month, with event contracts on the agenda.
The roundtable on Sept. 29 will discuss how the two organizations can work together to ensure regulatory harmonization as the derviatives market landscape evolves at a rapid pace.
In a joint statement on Sept. 5, the commissions wrote that “novel products” are shrouded in fragmented oversight and legal uncertainty. That statement could apply to things such as cryptocurrency trading as well as the kind of contracts now offered on sports by companies such as Kalshi, Crypto.com and Robinhood across the U.S., even in states that have not legalized sports betting.
One of the priorities outlined in the statement on was event contracts, and to what extent they should be allowed nationwide.
“Prediction markets, while they have existed around the world for decades, are undergoing rapid growth with growing demand from both market operators and the public,” noted the statement. “We should work together to provide clarity for innovators that want to list event contracts on prediction markets responsibly, including those based on securities. The SEC and CFTC should examine opportunities to collaborate to consider where event contracts may be made available to U.S. market participants regardless of where the jurisdictional lines fall.
“The SEC and CFTC must coordinate to ensure there is not a regulatory “no man’s land” due to inaction by one or both agencies. It is a new day at the SEC and the CFTC, and today we reaffirm the need to ensure regulation does not stand in the way of progress.”
At long last, a roundtable
It is not clear from the statement which entities will be invited to participate in the roundtable, which will also discuss topics such as the potential of expanding 24/7 markets, as well as portfolio margining and innovation exemptions. CFTC Acting Chair Caroline Pham, who was attributed in the joint statement, is the only commissioner currently at the CFTC, with the other four having left.
The last of the four to leave, Kristin Johnson, wrote in her farewell address that the U.S. and the CFTC currently have “too few guardrails and too little visibility into the prediction market landscape” and urged a firmer hand on oversight and regulation. That came in the same week that Kalshi expanded its sports offerings yet again to include markets that closely resemble parlay wagers, adding those to the prop-style contracts it added a few weeks ago.
Though the focus of this month’s roundtable will be wider than just prediction markets, it is still a belated discussion on the issue that the gaming industry has been waiting for all year long. The CFTC initially vowed back in early February to hold a prediction markets roundtable in spring of this year, before canceling it abruptly in late April.
As of the time of writing, the CFTC has received written submissions about prediction markets from more than 40 entities, ranging widely from gaming regulators to major sports leagues to tribes to lawmakers and more.
