Comment Text:
To properly protect everyone from the obvious pitfalls here, the Commission should take strong regulatory action regarding event contract derivatives now traded on prediction markets.
In the first place, this activity is gambling. Labeling it otherwise is just a ruse to avoid regulation, oversight, and taxes. In this era of profits above all and normalizing open corruption in the highest places, we know there are going to be problems when avoiding scrutiny. We are now seeing the proverbial tip of the iceberg with sports gambling in the forms of cheating, unaffordable money losses, and addiction, and all of it is highly problematic. This version of betting has the potential to be far worse.
These so-called “prediction markets” already raise serious concerns about market integrity, insider trading, and the commodification of events that should remain outside the reach of financial speculation. Allowing bets on military operations, foreign policy decisions, terrorism, assassination, or other government actions creates unacceptable risks. Individuals with relevant inside information have opportunity and financial incentive to exploit their knowledge. Worse yet, those with low moral character charged with making government decisions are likely to be influenced far more by their private financial interests than by what is best for the country. Even those with sterling characters are likely to be pressured by those with significant clout and personal motives. All in all, this will create an environment where public trust in all government and military policies and actions will be challenged more severely than it already is.
To protect the public interest, the Commission should explicitly prohibit event contracts related to military operations, acts of war, terrorism, political assassinations, financial and non-financial government policy decisions.
Any event contract where the outcome is controlled by a specific individual or small group is inherently susceptible to manipulation, and these wagers should not be permitted. Any situation where the outcome is normally known in advance to multiple inside individuals, including award show results, political speeches, corporate announcements, and similar proceedings should be prohibited.
The Commission has the authority and the responsibility under the Commodity Exchange Act to establish clear prohibitions for event contracts that are in opposition to the public interest. Therefore, the Commission should prohibit these categories of event contracts, strengthen surveillance and enforcement mechanisms to detect insider trading, and prioritize market integrity and public welfare over industry growth.
Our regulatory framework should protect public welfare rather than support placing bets on what is likely to undermine our societal, governmental, and military integrity.
