Outgoing CFTC Commissioner Warns Of Too Few Prediction Market Guardrails
In a farewell address, outgoing Commodity Futures Trading Commission (CFTC) Commissioner Kristin N. Johnson warned that there are too few guardrails surrounding prediction markets and called on the Commission for "effective regulation."
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Prediction Markets - Too Few Guardrails; Too Little Visibility
As Johnson's term comes to an end, the commissioner, who has been in her position since March 30, 2022, detailed her time at the CFTC as well as ongoing challenges for the Commission after her departure. One of those challenges is how to regulate prediction markets.
Johnson detailed her concerns with prediction markets and how the Commission needs to "express a clear voice" when it comes to their expectation.
 | As of today, we have too few guardrails and too little visibility into the prediction market landscape. Because the target audience for these contracts is retail customers and some market participants seem to be marching down a path to offer leveraged, margined prediction market contacts to retail investors, there is an urgent need for the Commission to express in a clear voice our expectations related to these contracts. -Kristin N. Johnson | CFTC Commissioner |
Johnson also called out the "rent or buy my license" issue, thanks to the popularity of prediction markets. The now-former Commissioner detailed how designated contract market (DCM) license applications are submitted to offer "traditional products," but once a license is obtained, they self-certify prediction market contracts. Alternatively, Johnson has seen license holders auction off their licenses to larger entities.
Following Johnson's statements, the chairman of the SEC, Paul Atkins, and the CFTC's Acting Chair Caroline Pham released a joint statement calling for both organizations to "examine opportunities to collaborate to consider where event contracts may be made available to U.S. market participants."
Prediction Market Popularity
While prediction markets aren't new, they have exploded in popularity over the last six months. That explosive popularity is largely thanks to platforms now offering sports event contracts.
Due to the rise in the popularity of prediction markets, we here at Odds Shark have created a Prediction Market Hub to help you navigate this new world. Consult it to get everything you need to know about this new way to bet.
The growth of the prediction market industry is not lost on former Commissioner Johnson, who said the industry could "eclipse crypto markets in volumes of retail customers' cash captured."
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CFTC Actions (Or Lack Thereof) On Prediction Markets
Since Donald Trump took over the White House, the CFTC has been silent on prediction markets. The federal regulator canceled a proposed prediction market roundtable with stakeholders such as state regulators. It then dropped its appeal against Kalshi for election contracts. Finally, it didn't weigh in when Kalshi self-certified contracts for spreads, totals, and props ahead of the NFL season.
The Commission has also approved five DCM licenses in the last three months. Another three license applications are pending per the CFTC's website.
CFTC Leadership Gap
Much of the CFTC's silence on prediction markets can be blamed on the lack of leadership. With Johnson's departure, only Acting Chair Caroline Pham remains. Typically, the CFTC's leadership group consists of a Chair and four Commissioners.
Caroline Pham has indicated she will leave her position once a new chair is appointed.
President Trump has nominated Brian Quintenz to lead the CFTC, but the confirmation for the former CFTC Commissioner and current board member for Kalshi has hit a snag. A FOIA investigation by Dustin Gouker uncovered that Quintenz and his staff were making inappropriate requests for information on Kalshi competitors.
Once that information was public, the White House requested that the Senate Agriculture, Nutrition, and Forestry Committee scrap the vote.
