Crypto Giants Unite Against Looming CFTC Prediction Market Ban

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In a significant display of unity, some notable crypto and fintech leaders have banded together to oppose a proposal to prohibit the political prediction market in the United States. The proposed rule change has perennial crypto critic Senator Elizabeth Warren and other actors behind it.

Warren and other Democrats have recently pushed for the U.S. Commodity Futures Trading Commission (CFTC) to finalize a rule clarifying that prohibited so-called “event contracts” include “staking or risking something of value.”

The Political Motivation Behind the Ban

This move ahead of the 2024 U.S. presidential election would prohibit people from staking on the outcome of the election. Besides the political angle, the rule would ban betting on an awards contest, a game in which one or more athletes compete, or an occurrence or non-occurrence in connection with such a contest or game. All such contracts will cease being traded by CFTC-registered entities.

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According to the lawmakers, the U.S. remains a targeted nation by foreign actors keen on interfering in the elections. Thus, the CFTC needs to act to prevent prospective voters from placing bets on the likely outcome of the election.

Crypto Industry’s Pushback on Prediction Market Ban

However, these crypto stakeholders maintain that such a move would amount to the CFTC overreaching its boundaries. Steve Humenik, Crypto.com SVP, highlighted that the U.S. Congress could have simply drafted a bill that expressly prohibited certain types of contracts, but it did not. As such, the CTFC should not serve as a tool.

As for Gemini co-founder Cameron Winklevoss, “Rather than forging ahead and denying Americans access to these powerful markets, the CFTC should withdraw this Proposed Rule and go back to the drawing board with industry stakeholders. This would be the trust-building move.”

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Will This Result in a Legal Tussle?

Other notable stakeholders in the crypto ecosystem who commented on the move were crypto VC Dragonfly Capital’s associate general counsels, Jessica Furr and Bryan Edelman. According to the duo, the Supreme Court’s overturning of the Chevron doctrine implies that the CFTC must ensure it can defend its authority to regulate these contracts.

They insisted that the CFTC could not assume responsibility for regulating election events as it was neither a gambling nor an election regulator and, therefore, ill-equipped to regulate this market. As per their submission, a competent court must determine if the CFTC has jurisdiction over election events contracts.

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