Comment Text:
Dear Chairman and Commissioners,
Im writing to provide my input on the Advance Notice of Proposed Rulemaking on Prediction Markets, as published in 91 FR 12516. My name is Paul Aston, and Im a quantitative investment professional and mathematical economist based in Mississippi. With over 35 years of experience in global financial markets, I run Tixall Global Advisors, LLC, a boutique advisory firm and fund focused on market microstructure and systematic investment strategies. Prediction markets have become a critical tool for us in delivering value to our institutional clients and investors, and I strongly support their proportionate regulation under the CFTCs oversight.
As someone who actively trades on platforms like Kalshi, Ive seen firsthand how prediction markets offer unique benefits. Theyre not just speculative tools; they provide actionable data through price discovery thats often more reliable than polls or expert opinions. For my firm, these markets allow us to hedge risks tied to political and economic events, like policy changes or election outcomes that could impact our clients portfolios. Beyond that, I believe they serve a broader societal good by revealing consensus odds on events, reducing information asymmetries that often hurt less informed participants in other markets. This isnt gambling. Its a legitimate economic activity akin to trading other derivatives, with real hedging utility and value in risk management.
I also want to highlight the innovation angle. The U.S. has a chance to lead in this space, but over-restricting or banning prediction markets will push activity to unregulated offshore platforms. Thats a loss for safety and for American competitiveness. Regulated markets like Kalshi offer standardization, liquidity, transparency, and critical data access for both participants and regulators. These are benefits weve seen with other exchange-traded assets, and they apply here too. Plus, as liquidity and diversity grow in prediction markets, theyre emerging as a new asset class with low correlation to traditional investments, offering portfolio diversification. Imagine the potential for individuals or funds to use these markets to cover disaster insurance gaps in an era of rising climate risks. Thats the kind of economic utility were talking about.
Addressing some of your specific questions, particularly from Topic Area B on Public Interest (Questions 7-14), I believe the balance between innovation and consumer protection lies in using the CFTCs existing tools. You already have robust authority to combat manipulation and insider trading in derivatives markets; those can be adapted here without broad categorical bans. On Topic Area E (Questions 29-32), Id argue that informed trading enhances price discovery and benefits all participants, provided its not based on illegal nonpublic information. And regarding Topic Area C (Questions 15-22), event contracts, even on sports or elections, have bona fide economic purpose, especially for hedging by entities in regulated gambling industries or other sectors exposed to such outcomes.
My ask is simple. Please regulate prediction markets proportionately with targeted rules that address specific risks, not broad prohibitions. Dont let the fear of a few bad actors punish the many who use these markets responsibly. The societal and economic benefits are too significant to ignore, and the U.S. should be at the forefront of this financial innovation.
Sincerely,
Paul Aston
