Comment Text:
Dear Chairman and Commissioners,
My name is Andrew Zhou, and I'm a trader and investor based in Illinois. I've been actively trading on prediction markets like Kalshi for a while now, and I'm writing to support the proportionate regulation of these markets in response to the Advance Notice of Proposed Rulemaking on Prediction Markets (91 FR 12516). I believe these markets provide real value, both to me personally and to society, and I urge the CFTC to regulate them in a way that protects consumers while allowing innovation to thrive.
As a trader, I rely on prediction markets for accurate forecasting of elections and other public events. The prices on these platforms often cut through the noise of polls and pundits, giving me insights I can't find elsewhere. This isn't just useful for my trades; it benefits everyone by making information more transparent. I've seen firsthand how platforms like Kalshi aggregate data in ways that help me make informed decisions, whether it's about political outcomes affecting my portfolio or economic events impacting my investments. Beyond that, I value the freedom to participate in legal, regulated markets. Banning or over-restricting these markets would push activity to unregulated offshore platforms, which are far less safe and lack oversight.
I want to address a few specific concerns tied to the CFTC's questions. Regarding Question 15 on defining gaming versus legitimate markets, I strongly believe event contracts are not gambling. They serve real economic purposes like hedging and price discovery, much like trading stocks or commodities. I research and analyze before placing a trade on Kalshi, just as I do with any investment. Labeling this as gaming dismisses the skill and judgment involved. On Question 7 about balancing innovation and consumer protection, I think the answer is clear: regulated markets like Kalshi are the safest option. The CFTC already has robust tools to tackle manipulation and insider trading, as noted in Questions 1 and 29. Use those tools instead of imposing broad categorical bans. Targeted rules address risks without punishing everyone.
I'm also concerned about US competitiveness, as raised in Question 33 on classification and costs. If we over-regulate or ban these markets, we're just handing the lead in financial innovation to other countries. We should be setting the standard for safe, transparent prediction markets, not ceding ground. Academic research backs this up too. Studies by economists like Hanson and Wolfers show how these markets improve information aggregation. That data should guide policy, not fear of misuse.
I understand there are risks, like potential manipulation or insider trading. But shutting down an entire market to stop a few bad actors is like closing the stock market over a single scandal. The CFTC has the power to enforce existing laws and adapt them to event contracts. Let's focus on that.
In closing, I ask the CFTC to support proportionate regulation of prediction markets. Don't ban or over-restrict them. Keep platforms like Kalshi accessible under clear, fair rules that protect consumers and keep the US at the forefront of financial innovation.
Sincerely,
Andrew Zhou
