Comment Text:
I am writing to urge the Commission to exercise its authority under CEA Section 5c(c)(5)(C) to determine that unregulated prediction markets are contrary to the public interest, and to impose strict limitations or prohibition on the expansion of these platforms.
Prediction markets are not the “wisdom of the crowd” — they are wealth extraction from ordinary participants.
A peer-reviewed study of Polymarket’s trading data found that accuracy on these platforms is driven almost entirely by a small informed minority — roughly 3% of traders — while approximately two-thirds of all participants operate at a loss. The study’s authors concluded directly: “their losses flow as profits to the informed minority.” This is not a neutral forecasting tool. It is a mechanism that systematically transfers money from retail participants to sophisticated, well-resourced insiders.
These platforms are structurally designed to facilitate insider trading.
This is not speculative. In April 2026, the Department of Justice charged a U.S. Army soldier with five felonies for allegedly using classified military intelligence to bet $33,000 on Polymarket that a raid to capture Nicolás Maduro would occur — cashing out approximately $400,000 when it did. In the final hours of the Biden administration, an anonymous Polymarket trader collected roughly $300,000 by correctly betting on four specific presidential pardons. Kalshi itself fined and suspended three federal candidates who bet on their own races. These are not edge cases. Prediction markets are, as one analyst noted, “tailor-made for abuse” by anyone with access to non-public information — politicians, military personnel, regulators, corporate executives — at the direct expense of the ordinary public placing bets on the other side.
The burden falls disproportionately on lower-income and financially vulnerable participants.
Traditional gambling regulation exists precisely because unregulated speculative markets prey on people who are least equipped to absorb losses. Prediction markets present the same harm in a more sophisticated wrapper. Platforms like Polymarket operate on blockchain infrastructure without meaningful identity verification, know-your-customer requirements, or anti-money laundering controls. This allows wealthy and anonymous actors — including foreign nationals — to participate with significant structural advantages over ordinary American users, who bear the losses.
The “price discovery” justification is circular and self-serving.
Proponents argue prediction markets are legitimate because they aggregate information. The research cited above directly contradicts this: the platforms do not reflect collective intelligence, they reflect the advantage of insiders. If the Commission permits this framework to expand, it is effectively licensing a system in which the most politically and financially connected actors are rewarded for exploiting their privileged access to information — the precise opposite of a fair market.
The Commission has both the authority and the obligation to act.
Under CEA Section 5c(c)(5)(C)(vi), the Commission may prohibit event contracts that are contrary to the public interest. Contracts tied to military operations, government policy, assassination, and political outcomes — where the “informed minority” may literally be government officials or military personnel with classified access — clearly meet that threshold. The Commission should use this proceeding to establish that public interest analysis includes not only hedging utility, but also the distributional consequences of who profits and who loses, and the structural incentive these platforms create for those in positions of public trust to exploit that trust for private financial gain.
I urge the Commission to impose strong restrictions on prediction market contracts involving government and political outcomes, require robust KYC and anti-money laundering controls on all platforms, close existing regulatory gaps that allow anonymous offshore participation by U.S. persons, and take seriously the documented evidence that these markets function as upward wealth transfers, not neutral forecasting tools.
Thank you for the opportunity to comment.
