The Chair of the Commodity Futures Trading Commission (CFTC) has warned that without regulatory harmonisation, prediction markets could face the same fate as FTX.
Michael Selig, speaking on the Farokh Radio podcast, expressed his concern that a lack of action will see the ‘implosion’ of prediction markets, as the sector’s descent offshore is accelerated.
He said: “We saw FTX and we saw all these implosions of crypto firms, I’m concerned we’ll see the same with prediction markets if we keep pushing it offshore into the unregulated space.
“We’ve got to make sure these exchanges come and register here in the United States and that our rules are set up to facilitate fair markets, markets that have investor protections, customer protections, and have real guardrails and rules.”
Prediction market companies such as Kalshi and Polymarket, which the CFTC federally regulates, have enjoyed a meteoric rise in the US, as they offer an alternative to online sports betting in states where the traditional vertical is currently prohibited.
Meanwhile, some of the US’s largest gaming companies, including the likes of FanDuel and DraftKings, have also launched their own prediction market offerings as a way of accessing states that they were previously shut out of.
However, states across the country have hit back, claiming that the companies are violating state gaming laws by offering markets akin to sports betting and gaming.
Last month, Senators Adam Schiff and John Curtis introduced a bipartisan bill to the US Senate that would ban ‘casino-style games’ and sports event contracts from being listed on prediction market platforms.
“It’s time for Congress to step in and eliminate this backdoor, which violates state consumer protections, intrudes upon tribal sovereignty, and offers no public revenue,” said Schiff in a statement announcing the bill’s introduction.
However, Selig hit back at states taking ‘politically motivated’ legal action against the vertical, urging them to instead work with the CFTC to establish clearly defined regulations.
“There’s this notion of don’t come in and work with us, and I don’t know why that’s the idea that some of these states have because we’re very happy to meet with the states and work together with the commissions and get the policy right,” he said.
“We’ve got to get the policy right, and we’re committed to working with every stakeholder that wants to engage with us. But what we don’t want is states and others suing our registrants to assert their authority in the same way that the last administration did with crypto, where they’re regulating by litigation and enforcement actions.”
Outside of the US, many nations have also chosen to prohibit platforms like Kalshi and Polymarket from operating.
Earlier this week, a court in Romania sided against Polymarket after the platform challenged the decision of the National Office for Gambling to blacklist it due to being classified as a gambling product.
However, Gibraltar, a territory that acts as one of the largest iGaming hubs in Europe, has recently revealed its desire to embrace the sector after announcing that it has licensed a prediction market operator.
Nigel Feetham, the British overseas territory’s Minister for Justice, Trade and Industry, shared his optimism over the potential of the sector, telling parliament that it is a ‘substantial area of potential growth’.
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