Better Markets, a nonprofit organization dedicated to overseeing financial markets, submitted a comment letter to the Commodity Futures Trading Commission (CFTC) on Monday. The letter calls for the withdrawal of the CFTC's proposed rule on prediction markets, arguing that it would essentially allow extensive gambling under the guise of financial event contracts and contradict the intentions of Congress.
Benjamin L. Schiffrin, the Director of Securities Policy at Better Markets, authored the letter, which addresses the CFTC's notice of proposed rulemaking on prediction markets released last month.
In his statement, Schiffrin emphasized, "Betting on whether a team will win a game or predicting a player's score is clearly gambling, and the American public is aware of this. Numerous surveys confirm this fact. The only dissenters seem to be the prediction market companies, who stand to gain financially, and the CFTC, which appears eager to cater to these companies' interests."
He criticized the agency's readiness to overlook congressional intent to achieve its desired outcomes, labeling its efforts to persuade the public that its actions align with their interests as shameful.
The letter's legal argument revolves around the Special Rule, a provision in the 2010 Dodd-Frank Act that empowers the CFTC to declare that event contracts related to gaming are not in the public interest.
Better Markets referenced a discussion between then-Senators Lincoln and Feinstein during a Senate debate, where Lincoln asserted that the commission must have the authority to prevent derivatives contracts that serve primarily to facilitate gambling through so-called 'event contracts.'
Lincoln highlighted events like the Super Bowl, the Kentucky Derby, and the Masters as examples where such contracts could be easily created, noting that they would not fulfill any genuine commercial purpose and would solely serve gambling interests.
Better Markets contends that the CFTC's proposal contradicts this historical context by defining 'gaming' based on dictionary interpretations of 'game' rather than the more relevant term 'gaming,' which closely relates to betting and wagering.
According to the CFTC's proposed definition, an activity is classified as gaming only if it is recreational, governed by rules, and depends on luck, skill, or athletic ability of participants. Better Markets argues that a definition focused on wagering money on contest outcomes or matters with mere entertainment value would align better with the statute and avoid unnecessary complications the agency aims to prevent.
By applying this alternative definition, the letter suggests that event contracts related to sports outcomes, poker and chess tournaments, reality TV results, and other pop culture bets should all be classified as gaming and deemed contrary to the public interest.
The letter points out that Kalshi currently offers contracts on the winner of Big Brother season 28, the most-searched individual on Google for the year, and potential statements from YouTube creator MrBeast in an upcoming video.
Additionally, the letter challenges the CFTC's rationale for allowing sports-related contracts based on price discovery, arguing that the agency fails to provide evidence linking national betting odds to local attendance patterns. Furthermore, it notes that the same reasoning would apply to bets placed through traditional sportsbooks, a situation the letter claims the agency does not intend.
Regarding casino-style contracts, Better Markets observes that the proposal categorizes games of pure chance, such as roulette, as more likely to be against the public interest, while games influenced by skill, like poker and chess, are considered less problematic.