Comment Text:
Dear Chairman and Commissioners,
My name is Joshua Kaatz, and I'm a lawyer based in Oregon. I'm writing to provide my input on the Advance Notice of Proposed Rulemaking on Prediction Markets, as published in 91 FR 12516. As someone who actively trades on platforms like Kalshi, I have a strong interest in seeing prediction markets regulated in a way that supports their unique value while addressing real risks. I believe these markets are a powerful tool for forecasting and economic participation, and I urge the CFTC to adopt a balanced, proportionate approach to regulation.
I've seen firsthand how prediction markets produce more accurate forecasts than polls or pundits. For elections and major public events, platforms like Kalshi often cut through the noise of biased commentary and deliver data-driven insights. This isn't just useful for traders like me; it's valuable for the public, media, and even policymakers who need reliable information. Academic research backs this up, showing how these markets aggregate information efficiently. I think the CFTC should recognize this benefit when considering rules, especially in response to Questions 7 and 8 under the Public Interest section of the ANPR.
I also want to stress the importance of regulated markets over unregulated alternatives. As a lawyer, I'm keenly aware of the risks posed by offshore platforms that operate without oversight. Banning or over-restricting prediction markets in the US won't stop trading; it will just push activity to less safe venues. Platforms like Kalshi, operating under CFTC supervision, offer consumer protections that unregulated sites can't match. This ties directly to Questions 9 and 10 on balancing innovation and protection. Regulation should keep activity onshore, not drive it away.
Another concern I have is the classification of event contracts as "gaming." These contracts serve legitimate economic purposes, like hedging and price discovery, and shouldn't be lumped in with gambling. Trading on prediction markets requires research and judgment, much like any other investment. I also believe informed trading, even by those with deep knowledge, improves price discovery and benefits everyone in the market. This relates to Questions 29 and 30 on inside information, where I think the focus should be on enforcing existing laws against insider trading rather than broad restrictions.
Finally, the US has a chance to lead in financial innovation. If we over-regulate or ban prediction markets, we risk ceding ground to other countries. Proportionate rules that target specific risks, like manipulation or fraud, are far better than categorical bans. I urge you to consider Questions 15 through 18 on listed activities and avoid overly broad prohibitions that stifle this emerging sector.
I support the freedom to participate in legal, regulated markets, and I ask the CFTC to craft rules that preserve the benefits of prediction markets while addressing legitimate concerns with targeted measures. Thank you for considering my perspective.
Sincerely,
Joshua Kaatz
