1. Purpose
The Prediction Markets Working Group (“PMWG”) supports the responsible development and regulation of CFTC-regulated prediction markets as federally regulated derivatives markets that facilitate price discovery, risk management, and information aggregation. This is an important priority for The Digital Chamber (TDC), as blockchain-enabled technologies will continue to be implemented into various forms of commodities trading, including prediction markets, due to their transparency-enabling features and near instantaneous settlement and trade finality capabilities.
2. Core Policy Principles
TDC advances the following principles to guide our prediction market advocacy work:
Deep Industry and Technical Knowledge: Members of the PMWG include former CFTC-staff, regulated designated contract markets (“DCM”s), future commission merchants (“FCM”s), legal experts, and infrastructure service providers. Our work is focused on bringing a deep technical and legal understanding of how these markets operate and are regulated. We aim to bring advanced subject-matter expertise to our efforts to ensure the regulations covering this growing industry are practical and effective.
Federal Regulatory Clarity and Preemption: Where prediction markets operate as CFTC-regulated event contract markets, federal commodities law should provide the exclusive regulatory framework. Regulatory fragmentation undermines market stability and consumer protection. This includes any future developments at the CFTC related to interactions of DCMs with blockchain-enabled technologies like stablecoins, public or DeFi orderbooks, and related technologies as deemed appropriate by federal regulators.
Market Integrity and Consumer Protections: The public needs to trust event-contracts are fair for these products to reach their full potential. Event contract markets should maintain robust listing standards, anti-manipulation controls, transparency, margin and capital safeguards, and surveillance mechanisms consistent with derivatives market best practices.
Distinction from Gambling Frameworks: Just as futures were once described as “gambling on grain” prediction markets face opposition from certain states who view the products as gambling. However, prediction markets structured on DCMs differ meaningfully from traditional gambling models in governance, clearing, capital controls, and risk management. Policy frameworks must reflect those distinctions.
Principled Contract Designs: Event contracts should be evaluated under clear, administrable standards that consider economic purpose, susceptibility to manipulation, and alignment with the public interest.
U.S. Leadership in Financial Innovation: The United States should lead in establishing modern regulatory frameworks for information markets; ensuring competitiveness while safeguarding systemic integrity.
3. Policy Priorities
Objective 1: Encourage the CFTC to initiate formal rulemaking specific to prediction markets to reduce ambiguity and promote consistent regulatory treatment
Key Results: Submit at least one comprehensive comment letter advocating for tailored rulemaking. Conduct 5+ meetings with senior CFTC staff. Publish a public policy paper outlining model regulatory principles.
Objective 2: Clarify the scope of federal authority over CFTC-regulated event contracts and reduce uncertainty created by overlapping state gaming enforcement.
Key Results: Publish a federal preemption legal analysis. Develop model federal statutory clarification language, if necessary.
Objective 3: Support a coherent national framework through strategic litigation involvement in in state vs. DCM event contract litigation.
Key Results: File at least one amicus brief in active litigation involving state regulators and CFTC-regulated prediction market operators. Produce a public explainer on the legal issues at stake in federal vs. state jurisdiction disputes.
Objective 4: Demonstrate that the industry supports strong market integrity and consumer protections.
Key Results: Publish a Prediction Market Best Practices Framework. Convene 3 roundtables with operators, academics, and compliance experts. Develop recommended disclosure and transparency standards for event contracts.
Objective 5: Educate state regulators and stakeholders on the federal framework governing CFTC-regulated prediction markets and distinguish derivatives markets from traditional gaming.
Key Results: Develop a state policymaker briefing toolkit. Publish a white paper explaining interaction between state gaming laws and federally regulated derivatives markets. Include F&Qs where helpful clearing up.
If you have any questions, please reach out to policy@digitalchamber.org.