The White House has finalized its review of the recent Commodity Futures Trading Commission’s (CFTC) prediction markets proposal framework.
According to the OIRA website, the White House finished its review last Friday. This means that the regulator’s proposed draft rule on prediction markets could be out soon for a second round of public comment.
Here, it’s worth pointing out that the first review done in March was meant to gather information on how to formulate the said framework.
In fact, during this stage, several legal experts, prediction markets, and even venture firms like 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.
Based on information gathered during this first stage of pubic comment, CFTC crafted a draft policy framework. This is what has been reviewed and could soon be released by the agency.
The next step would be another round of public feedback window on the draft proposal.
After tweaks to the draft based on the expected feedback, it will be sent again to the White House for review. Finally, it will be voted on by the agency commissioners before it can become a formal law.
Prediction markets – Growth and potential pitfalls
The push for clear rules for the segment has intensified amid the CFTC legal fight with states for jurisdiction in the segment. States like Minnesota, for instance, view prediction markets as gambling sites and have recently banned them.
Other states have also taken a similar strict stance, but the CFTC has moved to block their moves. In fact, sports betting firms also say the platforms are ‘100% gambling sites’ and have been calling for strict regulations.
But President Donald Trump has backed the CFTC for the sole oversight of the sector, calling it a ‘major industry.’
However, the legal fight between CFTC and states, which is likely to end in the Supreme Court, could also play out during the rulemaking process.
According to Daniel Wallach, a sports betting and gaming lawyer, traditional players will file lawsuits against the agency if the framework is formalized as law.
Coming soon too: APA lawsuits. Prediction markets litigation 2.0.
In short, rivals could move to court to block the CFTC from implementing the final prediction markets guidelines. It remains to be seen how the next few months will shape the sector.
The segment is now a multi-billion-dollar industry. In fact, it hit a new record monthly trading volume of $25 billion in May.
Final Summary
- The White House has reviewed the CFTC’s proposed draft rules on prediction markets.
- A legal analyst warned that traditional exchanges and sports betting sites could block CFTC’s plans.