The Commodity Futures Trading Commission has issued an
Advanced Notice of Proposed Rulemaking seeking public comment on whether new
regulations or amendments are needed for event contracts traded on prediction
markets.
The consultation examines how these contracts should be
treated under the Commodity Exchange Act and related commission regulations.
The consultation follows the CFTC’s
withdrawal of a 2024 proposal to ban political and sports‑related
prediction markets. Chair Michael S. Selig said the prior advisory “contributed to
uncertainty” and
would be rolled back. The action coincides with a joint crypto rulemaking
effort with the SEC.
CFTC Begins Review of Prediction Markets
In a statement, Selig described the move as the start of a
formal review process. He said the action is “an important step” in the
commission’s effort to promote “responsible innovation in our derivatives
markets.”
Selig added that the initiative begins rulemaking “grounded
in a rational and coherent interpretation of the Commodity Exchange Act” and
should reassure the public that the CFTC “will exercise its exclusive
jurisdiction over prediction markets.”
Prediction markets allow participants to trade contracts
linked to the outcome of future events. The CFTC said the notice asks questions
about how statutory core principles and existing regulations apply to these
products.
The agency is also seeking views on which types of event
contracts could be prohibited as contrary to the public interest. It requested
input on cost-benefit considerations related to prediction markets and other
regulatory issues.
Division of Market Oversight Issues Advisory to Exchanges
Separately, the CFTC’s Division of Market Oversight issued
an advisory addressing the listing of event contracts on exchanges. The
division said the notice responds to the “rapid rise in popularity of
prediction markets” and aims to encourage “growth and innovation” while
reminding exchanges of their regulatory responsibilities.
The advisory highlights obligations for designated contract
markets under the Commodity Exchange Act and commission rules.
The division also discussed issues that may apply to
sports-related event contracts. It said exchanges, acting as “front-line
regulators,” should take proactive steps to ensure their markets develop in
compliance with the law and commission regulations.
Consultation Process and Comment Deadline
The CFTC said the information gathered through the
consultation could inform possible future actions, including a formal
rulemaking process concerning prediction markets.
Public comments must be submitted in writing within 45 days
after the notice is published in the Federal Register. Submissions can be made
through the CFTC’s public comments portal.
This article was written by Tareq Sikder at www.financemagnates.com.
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