WASHINGTON, D.C.—Benjamin Schiffrin, Director of Securities Policy for Better Markets, issued the following statement in connection with the filing of Better Markets’ comment letter with the Commodity Futures Trading Commission (CFTC) regarding the CFTC’s request for comment on event contracts and prediction markets:

“Last week’s allegations that a U.S. Army service member attempted to profit from the use of inside information by betting on prediction markets demonstrates the need for clear rules governing prediction market platforms. The CFTC must stop acting as a cheerleader for prediction markets and start imposing rules that protect the public. Otherwise, the CFTC will continue to stray from its core mission of regulating the $500 trillion derivatives market, and it will promote rather than prevent the ever-increasing and troubling trend toward the gamification of finance and the blurring of the line between investing and gambling.

“That is why we filed a comment letter with the CFTC yesterday urging it to do three things:

• Distinguish event contracts that constitute legitimate financial instruments from event contracts that do nothing other than facilitate gambling.
• Prohibit prediction markets from offering event contracts on sporting events, pop culture, games, elections, and events that concern national security.
• Ban the use of inside information to profit on prediction markets.

“Prediction markets themselves recognize that event contracts on casino games like slot machines, roulette, and tables games are not legitimate financial instruments but rather ‘entertainment products.’ There is no basis to distinguish event contracts on who will win the Super Bowl, the Kentucky Derby, or the Masters. Nor is there a basis to distinguish event contracts on who will win an Oscar, Top Chef, or Survivor. And there is no reason to allow event contracts on elections or on geopolitical events involving life-or-death consequences. Insider betting on these latter event contracts is especially pernicious because it endangers national security. Regulating betting on all these events is not the CFTC’s purview.

“The CFTC regulates the derivatives market so that Americans can rely on fair and stable prices for their essential goods. It is not a gambling regulator. The CFTC must adopt rule that returns its focus to its core mission and limits event contracts on CFTC-registered entities to legitimate financial instruments that may be used as a hedge and not for gambling.”

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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.