a16z Backs CFTC, Opposes State-by-State Crackdowns on Prediction Markets

BlockBeats News, May 2nd - Venture capital firm a16z has supported the U.S. Commodity Futures Trading Commission (CFTC) in opposing a series of crackdowns by various states on prediction markets. Last Friday, a16z submitted an 18-page comment letter to the CFTC, stating that state regulatory actions against prediction market platforms — including cease and desist orders and proposed bans — are creating "significant barriers to fair access" for users. In just the past month, the CFTC has filed a series of lawsuits against the states of Illinois, Arizona, Connecticut, New York, and Wisconsin, claiming that these states are attempting to regulate markets supervised by the federal government, exceeding their jurisdiction.

a16z argues that requiring trading platforms to block U.S. users based on their state of residence conflicts with CFTC rules regarding fair market access. The company wrote: "Being forced to deny fair access to users in states seeking to license or ban certain event contracts could significantly reduce available liquidity." CFTC Chairman Mike Selig argues that event contracts in prediction markets are considered swaps, bringing them under the CFTC's "exclusive jurisdiction." State regulators and attorneys general, however, argue that platforms like Kalshi and Polymarket offer unlicensed gambling products.

a16z also discussed the utility of what it calls prediction markets, stating that their pricing mechanism is a "unique form of price discovery" that helps "reveal the probability of uncertain events." The company also claims that blockchain-based prediction markets are more transparent than traditional platforms, stating that the "auditability of on-chain transactions" makes it easier for participants and regulators to supervise. In April, prediction markets Polymarket and Kalshi saw their cumulative trading volume surpass $150 billion.