Comment Text:
Re: Advance Notice of Proposed Rulemaking on Prediction Markets
I am a high school football coach and physical education teacher from Knoxville, Tennessee. I am submitting this comment because I have watched prediction markets — and Kalshi specifically — hollow out the financial futures of young men I have known since they were fourteen years old. I am not an economist. I am someone who has earned the trust of young people for twenty years, and I am telling the Commission that what Kalshi is doing to them is predatory, harmful, and enabled by this agency's inaction.
The Commission should revoke Kalshi's DCM designation and prohibit retail-facing binary event contracts. The case for doing so is not complicated.
Kalshi Is a Gambling Company Wearing a Costume
Kalshi offers binary wagers on whether a named politician will be indicted, whether a Grammy winner will be announced, whether a sports team will cover a spread. A customer deposits money, picks a side, and either doubles their stake or loses everything. That is gambling. It has always been gambling. The only thing that distinguishes Kalshi from a sportsbook is that Kalshi holds a CFTC registration — a registration it obtained by persuading the agency that its products serve a legitimate derivatives function.
They do not. A derivative serves an economic purpose when it allows a party with genuine commercial exposure to transfer unwanted risk to a willing counterparty. No one holding a Kalshi contract on whether Congress passes a bill has a commercial exposure to that outcome that they are hedging. They are speculating for entertainment and profit. Under any honest application of the CEA's public interest standard — which grounds legitimate derivative markets in "managing and assuming price risks" with genuine commercial consequence — Kalshi's retail product line fails.
The Commission has the authority under CEA section 5c(c)(5)(C) to prohibit event contracts contrary to the public interest, explicitly including contracts involving gaming. Kalshi's contracts are gaming. The Commission should say so and act accordingly.
This argument is difficult to refute because it does not depend on contested empirical claims. It depends only on reading Kalshi's product list and applying the statute honestly.
Kalshi Is Systematically Evading State Consumer Protection Laws
Every state that has legalized sports betting has attached to that legalization mandatory consumer protections: age verification, loss limits, self-exclusion programs, responsible gambling funding, and advertising restrictions. These requirements exist because democratic majorities decided that gambling operators must bear some of the social cost of the addiction and financial harm their products cause.
Kalshi has none of these requirements because its CFTC registration functions — by Kalshi's own legal design — as a federal preemption shield against state gambling laws. This is not an incidental regulatory gap. It is the business model. Kalshi identified that a CFTC designation would allow it to offer gambling products nationally while avoiding every consumer protection cost that licensed gambling operators must bear. It then litigated aggressively to protect that advantage when the Commission tried to restrict its political contracts.
The result is a two-tiered system in which FanDuel must fund addiction treatment, restrict advertising, enforce deposit limits, and maintain self-exclusion programs — while Kalshi, offering an economically identical product, does none of those things. That is not a market. That is regulatory arbitrage at the public's expense.
Tennessee, where I live and work, has one of the more tightly regulated sports betting frameworks in the country. Knoxville teenagers cannot legally open a FanDuel account. They can open a Kalshi account. The Commission should find that intolerable, because it is.
The Targeting of Young People Is Deliberate and Documented
The Commission asks in question 19(d) whether it should consider the youth skew of prediction market participants. The answer is yes — and the Commission should treat it not as a factor to weigh but as evidence of predatory intent.
Kalshi's advertising is concentrated on Instagram, TikTok, and YouTube — platforms that skew dramatically young. Its referral bonus structure incentivizes existing users to recruit friends, spreading through social networks that are predominantly composed of people in their late teens and twenties. Its interface design — real-time odds, push notifications timed to breaking news, frictionless one-tap trading — is lifted directly from the mobile sports betting playbook, which itself was engineered by behavioral psychologists to maximize compulsive engagement.
This matters for a reason the Commission should find legally dispositive: young adults are the population most clinically vulnerable to gambling disorder. The research is unambiguous and has been for decades. Deliberately concentrating marketing in that population, using interface design known to exploit impulse control vulnerabilities, while providing none of the responsible gambling infrastructure that every other gambling operator is required to maintain, is not an oversight. It is a choice. It is a choice that causes harm. And it is a choice the Commission currently subsidizes with its registration.
Political Contracts Are Uniquely Dangerous and Should Be Banned Outright
The Commission's questions 29 through 32 address manipulation and insider trading risks in prediction markets. These risks are most acute — and most consequential — in political event contracts, and they counsel for categorical prohibition rather than incremental regulation.
Federal employees, congressional staff, lobbyists, and political operatives routinely possess material non-public information about the political outcomes Kalshi turns into tradeable contracts. CEA sections 4c(a)(3) and 4c(a)(4) prohibit federal employees from trading on such information, but the Commission has brought no enforcement actions in this space despite the explosive growth of political contracts. Compliance is effectively unmonitored.
Beyond insider trading, political contracts create a class of market participants with strong financial interests in specific electoral and legislative outcomes — and therefore with financial incentives to take actions that influence those outcomes. This is not speculative. It is the predictable consequence of creating leveraged financial markets in democratic events. No legitimate price discovery or risk management function justifies that risk to democratic integrity.
The Commission has clear statutory authority to prohibit these contracts. It should use it immediately, without waiting for the conclusion of this rulemaking.
What the Commission Should Do
The Commission does not need more information. It has had since 2008 to study this industry, and the industry has used that time to grow into a mass-market gambling operation. Further study is not caution — it is avoidance.
The Commission should revoke Kalshi's DCM designation, or immediately initiate proceedings toward that end, on the grounds that its primary business is contrary to the public interest under CEA section 5c(c)(5)(C). It should categorically prohibit political event contracts. It should end self-certification for retail event contracts and require mandatory prior approval with public interest findings. And it should require, as an immediate condition of continued DCM registration for any prediction market, responsible gambling protections at least as stringent as those required under applicable state sports betting law.
I coach young men. I teach them that decisions have consequences and that discipline matters. The Commission should hold itself to the same standard. The consequences of continued inaction are not abstract. They are showing up in my community, in my players' lives, and in the offices of counselors and social workers across this country.
Act accordingly!
