Comment Text:
Dear Chairman and Commissioners,
My name is Keath Levitt, and Im a trader and investor from Illinois with a career built in financial markets, including as a market maker in derivatives and prediction markets like Kalshi. Im writing in response to the Advance Notice of Proposed Rulemaking on Prediction Markets (91 FR 12516) to express my strong support for proportionate, well-thought-out regulation of these markets, rather than broad restrictions or bans.
Ive spent years managing the very risks often cited as reasons to limit prediction markets, things like adverse selection, jump risk, and insider information. These challenges are real, but theyre also inherent to how markets function. Prediction markets arent just games or speculation. They offer unique value by aggregating information into prices that often outstrip polls or pundits in accuracy, especially for elections and public events. They also let people like me hedge real financial risks, whether its an election outcome affecting tax policy or a Fed decision impacting mortgage timing. This isnt gambling. Its research, judgment, and risk management, no different from trading stocks or commodities.
As a market maker, Ive seen firsthand how regulated platforms like Kalshi are far safer than unregulated offshore alternatives. If the CFTC over-restricts these markets, activity will just move to less transparent, riskier venues. Thats not protection. Its the opposite. The US should be leading in financial innovation, not ceding ground to other countries. Plus, the CFTC already has strong tools to tackle manipulation and insider trading in other derivatives markets. Those can be adapted here without reinventing the wheel or punishing legitimate participants.
Id like to address a few specific questions from the ANPR. On Question 7, regarding public interest, I believe prediction markets serve a clear public good through price discovery and risk transfer, benefiting not just traders but anyone who relies on accurate forecasts. On Question 15, about defining gaming versus legitimate markets, I urge the CFTC to recognize event contracts as economic tools, not gambling. Their purpose is hedging and information aggregation, not mere entertainment. And on Question 29, about inside information, Ill say this: informed trading often improves price discovery, making markets more efficient. The issue isnt the trading itself, its ensuring existing laws against insider abuse are enforced consistently, not used as an excuse for broad bans.
Markets are messy, adaptive systems. Overregulation wont eliminate risks like information asymmetry or speculative losses. Itll just choke liquidity and participation, reducing the very benefits these markets offer. Ive navigated toxic order flow and event-driven volatility on platforms like Kalshi, and I can tell you its possible to operate responsibly with disciplined risk management. The CFTC should focus on transparency and consistent enforcement, not paternalistic restrictions.
I respectfully ask that you support proportionate regulation of prediction markets. Craft clear rules that address specific risks without stifling innovation or access. These markets have real value, and with the right oversight, they can thrive safely.
Sincerely,
Keath Levitt
