Coinbase, Gemini oppose CFTC's proposal to ban market prediction: Overreach and unclear definition

Last week, Democrats led by Elizabeth Warren expressed support for the US Commodity Futures Trading Commission's proposal to "ban political and sports betting," urging swift action, sparking opposition from various cryptocurrency companies including Gemini, Crypto.com, Robinhood, and Coinbase. Continue to Bet on Rate Cuts! Polymarket Bets Over $1.48 Million on September Rate Cuts, Lawmakers Call for Ban on Election Betting

Democratic lawmakers urge CFTC to ban political and sports gambling

In May of this year, the CFTC faced a proposal to ban "event contracts" related to political events and sports competitions, citing the increasing trend in political prediction and gambling markets, which was criticized for its unclear boundaries and definitions. According to the proposal:

Event contracts involving award competitions, political issues, terrorism, war, and assassination will not be allowed to be listed, traded, or cleared.

Eight Democratic lawmakers urged the CFTC last week to finalize and implement relevant rules as soon as possible, emphasizing that the gambling market is interfering with elections and undermining public trust in democracy.

It is evident that prediction markets such as Polymarket and Kalshi will be the hardest hit, with many cryptocurrency and fintech companies expressing opposition to this move.

Crypto venture capital firm Paradigm supports prediction market Kalshi: Prediction platforms can help companies hedge risks

Strong opposition voices

Coinbase: Unclear definitions, weak stance

On Friday, Coinbase's Chief Legal Officer tweeted that the proposal failed to recognize the benefits of prediction markets for the general public, calling for its withdrawal and renegotiation with industry professionals and stakeholders:

In short, the proposal has issues with its definitions. The broad definition of "gambling" in the proposal could encompass predictions like Nobel Prizes and Oscars, which are not actually gambling in essence.

He added, "The unilateral evaluation of prediction contracts in the proposal is not in the public interest and goes beyond the CFTC's regulatory authority."

Gemini: Fences, not barriers

Gemini co-founder Cameron Winklevoss also emphasized that decentralized prediction markets are a significant innovation with practical societal benefits, providing useful and reliable information on future events, unlike polls or expert opinions:

Regulation needs to strike a balance between innovation and consumer protection and should embrace the future with fences, not barriers. This blanket ban lacks careful consideration.

He also stated that some politicians' opinions are eroding the committee's integrity, and regulatory agencies should not expand their powers by setting rules:

The CFTC should reconsider this proposal with the industry, rather than restricting Americans' participation in prediction markets.

Dragonfly Capital: CFTC has no regulatory authority

Additionally, Jessica Furr and Bryan Edelman, legal advisors at crypto venture capital firm Dragonfly Capital, stated that the CFTC has no authority to regulate political event contracts:

The CFTC is neither a gambling nor an election regulatory body and cannot regulate this market. The jurisdiction of the agency in this matter still needs to be determined by the courts.

It is reported that commenters also include Steve Humenik, Global Head of Derivatives at Crypto.com and a member of the CFTC's Digital Assets Market Structure (DAMS) Subcommittee, as well as online brokerage Robinhood, among others.