Comment Text:
To the Secretary of the Commission,
I am writing to provide public comment regarding the regulation of event contracts and prediction markets. As the Commission seeks to define the boundaries of these markets, I urge a regulatory framework that promotes innovation and market depth while maintaining rigorous safeguards against manipulation.
1. Parity with Legalized Gaming Frameworks
The Commission should consider the success of the regulated sports betting industry (e.g., platforms like FanDuel and DraftKings) as a blueprint for market breadth. To achieve true price discovery and economic utility, platforms like Kalshi should be permitted to offer a vast and diverse array of event contracts. Restricting these markets to a narrow set of "macro" events limits their potential as hedging tools and information aggregators for the general public.
2. Addressing Conflict of Interest and "Insider" Manipulation
While I support an expansive market, the integrity of the "underlying" event is paramount. A significant regulatory gap exists regarding participants who have the direct power to influence the outcome of a contract.
Specifically, I am concerned about scenarios where individuals—such as professional athletes, corporate executives, or political figures—partner with a platform for promotion while simultaneously being the subject of a tradeable event. For example:
If a player has a contract regarding their "team loyalty" or "free agency status," they hold unilateral control over the outcome.
Without strict prohibitions on "insider" betting or manipulation by the event’s primary actors, these markets risk becoming vehicles for bad-faith actors to profit from their own private decisions at the expense of the public.
3. Proposed Safeguards
I recommend that the CFTC implement clear "Ineligible Participant" rules. These rules should prohibit any individual (and their immediate associates) from trading on or financially benefiting from the outcome of an event in which they are a primary participant or decision-maker. Furthermore, promotional partnerships should be strictly decoupled from the specific markets involving the partner’s own performance or career decisions to prevent even the appearance of a conflict of interest.
Conclusion
I support a future where prediction markets are as robust and varied as modern sportsbooks, provided that the CFTC establishes "bright-line" rules against self-manipulation and insider activity.
For prediction markets to achieve mainstream adoption and provide meaningful liquidity, they must be allowed to offer competitive user experiences. I strongly encourage the Commission to permit the implementation of promotional tools common in the gaming and financial industries, such as "Odds Boosts" and "Profit Boosts, as well as "
Protected Plays." These features allow platforms like Kalshi to offer enhanced payouts on specific markets, which incentivizes participation and deepens the pool of participants. Providing the flexibility to offer these incentives would ensure that prediction markets remain vibrant and attractive to retail users, allowing them to better compete with existing regulated gaming frameworks while fostering a more active and efficient marketplace.
Respectfully,
Ben Tomana
