Campaign Urges Agency to Not Let Kalshi and Polymarket Call the Shots
Washington, D.C. — On Tuesday, Demand Progress Education Fund launched a “Prediction Markets are Gambling” billboard campaign outside of the Commodity Futures Trading Commission building in Washington, D.C. The campaign follows a letter sent by Demand Progress Education Fund, Americans for Financial Reform Education Fund (AFREF), and Public Citizen calling on the CFTC to reject any efforts to bring “events contracts” under the agency’s jurisdiction. Instead, the letter urges the CFTC to respect the authority of states to continue regulating what are essentially gambling bets. This campaign is all the more urgent since the CFTC published a Notice of Proposed Rulemaking in June that would create a pathway for prediction markets to offer sports betting by another name nationwide.
Prediction markets companies like Kalshi and Polymarket are trying to disguise gambling bets as financial derivatives in order to evade state gambling and tax laws – while at the same time exposing Americans to dangerous gambling platforms that are rife with corruption, manipulation, moral hazards and serious losses for everyday players. Their strategy is to disguise gambling bets as financial derivatives called “swaps” and list them on CFTC-registered trading exchanges, then claim that the CFTC’s exclusive federal jurisdiction preempts or overrides state and tribal authority to regulate gambling.
Their desired result would undermine the CFTC’s primary responsibility as a traditional financial markets regulator while repurposing the agency into a de facto national gambling czar – a role for which the CFTC does not have adequate experience, expertise, personnel, technology, budget or mandate to hold. And, this shift would also undermine the states’ ability to enforce key state consumer protections and financial regulations they have overseen for decades
The groups’ letter responded to the CFTC’s March request for public comment on proposed rulemaking on prediction markets. Since then, the CFTC published a proposal that would give platforms like Kalshi and Polymarket a green light to bypass state gambling regimes, undermining consumer protections and state tax bases. The proposal completely misses the mark by accepting the industry’s claim that prediction markets are derivatives, rather than mass-market gambling products. It also does little to address insider trading in events markets for election outcomes, Congressional votes, and more.
The letter argues that the CFTC does not even have the legal jurisdiction to regulate these types of event contracts in the first place. The CFTC should focus its energy and scarce resources on its mission under the law: ensuring the integrity and efficiency of the derivatives markets on which American businesses and consumers rely.
“Prediction markets companies are trying to sneak their way into a weaker regulatory regime at the CFTC,” said Mark Hays, associate director for crypto and fintech with Demand Progress Education Fund and Americans for Financial Reform Education Fund. “Events contracts are simply gambling by another name, and they should be regulated by the state laws that have set firm guardrails around these risky activities for decades.”