Comment Text:
Dear Chairman and Commissioners,
My name is Daniel Stone, and I'm a trader and investor based in Florida. I've spent years working in financial markets, so I understand the value of accurate information and the risks of bad actors exploiting it. I've used prediction markets a few times myself, and Im writing to support well-regulated prediction markets in response to the Advance Notice of Proposed Rulemaking on Prediction Markets (91 FR 12516). I believe these markets offer unique benefits for forecasting, hedging, and public decision-making, but I also recognize the need for oversight to prevent abuse.
As someone who follows elections and public events closely, Ive seen firsthand how prediction markets often provide better forecasts than polls or pundits. The aggregated wisdom of many participants, putting real money on the line, tends to cut through noise and bias in a way traditional surveys cant. This isnt just useful for traders like me; it helps the public and even policymakers make sense of complex events. Beyond forecasting, I see prediction markets as a tool for hedging personal or business risks tied to economic or political outcomes. And frankly, I value the freedom to participate in legal, regulated markets as a citizen, not just as an investor.
Im not blind to the risks, though. Ive seen how players with inside information can exploit markets for ill-gotten gains. But banning or over-restricting prediction markets isnt the answer. Shutting them down here would just push activity to unregulated offshore platforms, which are far less safe than a CFTC-registered exchange like Kalshi. Instead, I urge proportionate, targeted regulation over broad categorical bans. The CFTC already has tools to combat manipulation and insider trading in other derivatives markets. Adapt those tools here. Impose strict event criteria, ramp up regulatory scrutiny, and publicly shame perpetrators to deter abuse.
I suggest creating an ombudsman office to oversee prediction markets, and to receive and investigate complaints from users who suspect foul play. Their role could also be to evaluate the social or economic value of specific markets (some events might be trivial or inappropriate for trading), check if certain actors have undue influence over outcomes, and investigate suspect trades, especially those timed suspiciously around major policy shifts. This would add a layer of accountability without stifling the benefits of these markets.
Prediction markets balance innovation with consumer protection by providing valuable price discovery and risk management tools, as long as oversight is strong. And on the topic of Inside Information, I believe informed traders can improve price discovery, but only if insider trading is policed aggressively with existing laws.
I ask the CFTC to support prediction markets' growth with smart, focused regulation, not heavy-handed restrictions that punish everyone for the actions of a few. Thank you for considering my input.
Sincerely,
Daniel Stone
