Comment Text:
Concerning the regulation of financial activity on prediction markets, there are multiple points of issue from the perspective on an informed citizen. 1. The majority of trade volume across all prediction markets is composed of transactions surrounding sports events. Sports betting remains illegal in 11 states, though Kalshi, one of the leading prediction market applications, publicly advertises themselves as, "the first app for legal sports betting in all 50 states." Congruent with this statement, Kalshi makes no attempt to respect the legal jurisdiction of those states who have declared illegal the company's primary source of revenue. 2. Prediction markets lack sufficient guardrails to prevent insider trading. The CEO of Polymarket has even stated publicly that insider information being leaked serves the purpose of making their listed predictions more "truthful." Multiple instances of new accounts being created to place well-timed bets have gone seemingly uninvestigated. The two most notable instances being bets on the continued tenure of Nicolas Maduro and Ayatollah Ali Khamenei placed hours before their respective abduction and assassination. As these applications exist currently, any of age persons can create an account to place bets on any event up to and including those they have direct and meaningful influence on. What is even more disturbing than the war profiteering that this allows, is the possibility that politically powerful individuals now have a financial incentive to orchestrate events that result in the preventable loss of human lives. 3. Transactions made via prediction markets do not qualify for the legal status that they currently have. They are obviously not commodities or swaps, and so have been given the special qualifier of, "event contracts." However, the CFTC has previously prevented companies from listing similar contracts like the 2012 Nadex election markets. The reasons given then were, in short, unpredictability, lack of economic purpose, and the potential to influence political outcomes. Polymarket and Kalshi allow event contracts on any event, regardless of any of the above factors. Predictability? Polymarket allows bets on the return of Jesus Christ. Influence on political events? Changes in these markets are already disclosing confidential military information. Economic purpose? What exactly was the purpose of allowing fans to bet on the presence of sex toys at WNBA games during last year's season? Whatever decisions are made concerning the regulation of prediction markets, it is necessary that the leading companies behind them be penalized for the irresponsible behavior they've displayed thus far, and that the scope of any future business in this sector be significantly reduced.
