Comment Text:
Dear Chairman and Commissioners,
My name is Elena Madariaga, and I am a lawyer based in the United States. I am writing to provide my input on the Advance Notice of Proposed Rulemaking on Prediction Markets, as published in the Federal Register (91 FR 12516). As someone who closely follows prediction markets, though I do not actively trade, I strongly support the development of well-regulated prediction markets under the CFTC's oversight. I believe they offer significant value to individuals, businesses, and society as a whole.
Prediction markets are not just speculative tools; they provide unique information through price discovery that benefits public decision-making. I've seen how these markets often predict outcomes more accurately than traditional polls or expert opinions, which is invaluable for understanding trends that affect legal and economic environments. Beyond that, they allow individuals and businesses to hedge real financial risks. For instance, a small business owner could use event contracts to mitigate uncertainty around policy changes or economic indicators like inflation data, which directly impact operations. This hedging utility is a legitimate economic purpose, not gambling, and should be recognized as such by the CFTC.
I also believe that regulated markets, like Kalshi operating on a CFTC-registered Designated Contract Market, are far safer than unregulated offshore platforms. Pushing activity to less transparent venues by over-restricting domestic markets would harm participants and undermine U.S. leadership in financial innovation. We should be fostering competitiveness in this space, not ceding it to other jurisdictions. Additionally, the CFTC already possesses robust tools to address concerns like manipulation and insider trading in other derivatives markets. These can and should be adapted for event contracts rather than imposing broad bans or categorical restrictions.
Addressing specific questions in the ANPR, Id like to comment on Question 8 under Public Interest, regarding the balance between innovation and consumer protection. I believe proportionate regulation, not prohibition, is the answer; targeted rules can address risks while preserving benefits. On Question 15 under Listed Activities, I urge the CFTC to avoid classifying event contracts as gaming. Their role in hedging and price discovery sets them apart from gambling. Finally, regarding Question 29 under Inside Information, I support the view that informed trading enhances price accuracy and benefits all participants, so long as existing laws against insider trading by federal officials and others are enforced.
I respectfully ask the CFTC to craft regulations that support prediction markets with clear, fair rules rather than overly restrictive measures. This approach will protect consumers, encourage innovation, and ensure the U.S. remains a leader in financial markets. Thank you for considering my perspective.
Sincerely,
Elena Madariaga
