The US Commodity Futures Trading Commission (CFTC) has unveiled its first regulatory framework for prediction markets, releasing what it described as a proposed approach to governing the industry under American law.
The plan, issued by the agency on Wednesday, would establish standards for certain types of wagering while leaving markets tied to elections and politics largely outside the category of activities that would trigger more intensive scrutiny.
Where The Line Is DrawnAt the same time, it suggests that wagering on sports outcomes is likely not broadly contrary to the public interest, while staking money on gambling or games of pure luck likely would be.
The framework further argues that prediction markets based on sports scores, price spreads, win-loss outcomes, tournament advancement, and similar data may serve a “price discovery” function and provide meaningful information.
The draft also addresses election-related contracts, noting that election wagers are “contests, not gaming,” and therefore fall outside the “enumerated activities” that would allow the CFTC to apply its 90-day review process to event contracts.
45-Day Comment Period For Prediction MarketsIn its announcement, the CFTC acknowledged that the rules released Wednesday are “thin,” and said additional rulemaking about prediction markets could be introduced in the future. After Wednesday’s release, the proposed rule will undergo a 45-day public comment period.
Selig added that the new prediction markets proposal provides a durable and transparent framework for identifying the contracts Congress directed the agency to scrutinize, while also letting legitimate markets continue.
It would then evaluate whether the event fits within the categories defined in the Commodity Exchange Act, and finally conduct a public interest analysis to decide whether the prediction markets’ contract should be banned or allowed.
Featured image created with OpenArt; chart from TradingView.com
