Comment Text:
Dear Chairman and Commissioners,
My name is Canyon Burton, and I'm a finance professional from Louisiana with a background in equity derivatives. I'm writing to comment on the Advance Notice of Proposed Rulemaking on Prediction Markets, as published in 91 FR 12516. I've used prediction markets a few times myself, and I believe they have real potential for individuals and businesses like me to hedge financial risks. At the same time, I have concerns about how these markets are currently operating, and I want to share my thoughts on how the CFTC can regulate them effectively.
As someone in finance, I see prediction markets as a tool with unique value. They aggregate information in ways that polls or pundits often can't match, and that can help with price discovery for events that impact my personal and professional finances. For instance, being able to hedge against policy changes or election outcomes that could affect tax rates or business regulations would be a game-changer for many in my field. This isn't just speculative play; it's about managing real risk. I also believe that the U.S. needs to stay competitive in financial innovation. If we over-restrict these markets, we risk pushing activity to offshore platforms with no oversight, which helps no one.
That said, I'm troubled by the current state of prediction markets. A vast majority of the volume and liquidity on these exchanges comes from what looks like gambling or purely speculative activity. The financial contracts offered are limited, with very thin liquidity, and I worry that the line between legitimate financial derivatives and gambling is getting dangerously blurred. I'm not sure exactly where that line should be drawn, whether it's closer to betting on distressed company equity or outright sports gambling. But I do know that, as an advocate for derivatives, I don't like the idea of these markets being seen as just another betting platform. The potential for real financial use is there, but it needs to be separated from the gambling-like flows dominating the space right now.
Addressing some of your specific questions, like those in Topic Area B on public interest (Questions 7-14), I think the CFTC should focus on balancing innovation with consumer protection by creating clear rules that distinguish between gambling and financial utility. On Topic Area C about listed activities (Questions 15-22), I'd urge you to define what constitutes "gaming" narrowly, so that contracts with legitimate hedging purposes aren't swept up in bans. And regarding Topic Area E on inside information (Questions 29-32), I believe the existing laws against insider trading and market manipulation are a good starting point; enforce those rather than banning entire categories of contracts.
In closing, I support proportionate regulation of prediction markets. The first step, in my view, is to separate the gambling business from contracts with direct financial use. Don't over-restrict or ban these markets, but do set clear boundaries to protect consumers and preserve their potential for innovation. Thank you for considering my input.
Sincerely,
Canyon Burton
