Comment Text:
Dear Chair and Commissioners:
I write to express my strong opposition to the Commission's continued accommodation of so-called "prediction markets" — including event contracts on elections, sports outcomes, and public affairs — and to urge the Commission to use its full statutory authority to halt their proliferation rather than bless them as legitimate financial instruments.
I am a concerned voter, an entrepreneur, and an increasingly active political donor. I am also a software developer and product manager with material experience building infrastructure for financial markets, including cryptocurrency and decentralized finance ("DeFi") products. I write today not as a critic from outside the industry but as someone who has spent years inside it, and who has come full circle. The view I held while building these systems — that 24/7 markets, novel asset classes, and frictionless retail access were unambiguous goods — is one I now consider naïve at best and complicit at worst.
Prediction markets are the latest entry in a now-familiar genre. The pitch is always the same: a profound new mechanism for "price discovery," powered by the "wisdom of crowds," will surface truth more efficiently than legacy institutions. The reality, every time, is the same: a thin veneer of intellectual respectability draped over a product engineered to extract money from retail participants who have been told, repeatedly and across every media channel, that they are sophisticated investors when they are in fact marks.
I want to be specific about why I believe the Commission should reject the legitimacy of these markets.
First, the "price discovery" rationale is largely pretextual. Election odds, sports outcomes, and topical event contracts do not require new derivatives markets to be discovered. They are already discovered — by pollsters, oddsmakers, journalists, statisticians, and aggregators — at a fraction of the social cost. The marginal informational value of letting retail participants gamble on these outcomes is, at best, modest. The marginal harm is enormous.
Second, the product is gambling. It is engineered like gambling, marketed like gambling, and metabolized by users like gambling. The use of derivatives terminology and CFTC-adjacent legitimacy serves primarily to evade state gambling regulators and to attach the patina of a regulated financial market to what is, functionally, a casino. The Commission was not created to be a flag of convenience for sportsbooks.
Third, the retail harm is real and predictable. In my time in cryptocurrency and DeFi, I watched the same dynamic play out repeatedly: technically novel products were marketed to retail through influencer ecosystems, podcast networks, and social media, with return claims and gamified interfaces designed to maximize engagement and minimize friction. The result was not a more financially literate or empowered public. The result was a generation of retail participants — disproportionately young, disproportionately financially fragile — who lost real money to sophisticated counterparties and absorbed habits indistinguishable from problem gambling. Prediction markets are the same playbook, executed in many cases by the same kinds of operators, and now increasingly with explicit political cover.
Fourth, election event contracts are uniquely corrosive. Unlike contracts on commodities or weather, contracts on the outcomes of elections create a direct financial incentive for participants — and for the operators of these markets — to influence elections, to spread disinformation that moves prices, and to launder political content as "trading signals." Allowing American citizens to take leveraged financial positions on the outcome of their own democracy is not an innovation. It is a category error. The Commission should not need an academic literature to tell it that monetizing election outcomes corrodes the civic fabric on which these contracts sit.
Fifth, the coordinated media and political pressure to legitimize these products should itself be evidence to the Commission. When a product is being promoted simultaneously by venture-funded operators, by paid podcasters, by political actors, and by friendly think-tank output, and when the unifying message is that the regulator should step aside, the Commission's instinct should be skepticism, not accommodation. I have watched this pressure campaign run successfully against other regulators. I am asking the Commission not to capitulate.
I would urge the Commission to do the following:
Use its existing authority under the Commodity Exchange Act to prohibit event contracts involving gaming, elections, or activities contrary to state law, rather than narrowly construing that authority.
Decline to grant designated contract market status or self-certification accommodations for products whose primary userbase is retail and whose primary use case is wagering.
Open a meaningful public examination of the consumer-protection record of the operators currently offering these products, including the demographics of their users, the distribution of profits and losses across those users, and the marketing channels through which they are acquired.
Coordinate with state attorneys general, state gaming regulators, and the SEC rather than allow federal preemption to function as a shield against legitimate state-level consumer protection.
I recognize that financial innovation has real value, and I am not writing as someone reflexively hostile to new market structures. I am writing as someone who has built them, watched what they actually do to ordinary people, and concluded that the next chapter does not need to be written. The Commission has the authority, and the institutional credibility, to draw a line here. I urge it to do so. As a voter and a donor, I will be paying attention to whether it does.
Thank you for your time and for your service.
