Comment Text:
As a lecturer at the UC Berkeley School of Law specializing in transactional law, I view market participants through the lens of their organizational structure and intended mission. The Commission’s current regulatory framework for Designated Contract Markets (DCMs) was built for commercial exchanges where profit maximization and volume-driven liquidity are the primary drivers. Applying this one-size-fits-all architecture to non-profit, research-focused prediction markets creates an administrative barrier that ignores the fundamental difference between a commercial firm and a 501(c)(3) research entity.
In my experience analyzing corporate governance and entity formation, these legal structures dictate fundamentally different incentive models. A commercial exchange is incentivized by transaction fees and volume, while a non-profit research market is driven by the utility and accuracy of the data it generates for public policy or scientific discourse. When the Commission forces these non-profit entities to comply with the same market-structure rules designed for large-scale, commercial volume, it effectively prevents them from deploying their forecasting tools for the public good. The current approach forces these organizations to redirect scarce research funding toward managing technical requirements that are disconnected from their core mission.
The Commission should recognize this distinction by formalizing a regulatory pathway that accounts for the unique nature of non-profit, research-driven prediction markets. In so doing, the Commission can protect market integrity while allowing these valuable public-focused entities to operate safely within research-oriented parameters. This tiered approach is not only consistent with the Commission’s mission but is also a more efficient application of regulatory resources.
Sincerely,
Jose Lopez
Lecturer, UC Berkeley School of Law
San Francisco, CA
