The two largest U.S. cryptocurrency exchanges, Gemini and Coinbase, challenge proposed rules by the U.S. Commodity Futures Trading Commission (CFTC) that restrict prediction markets like Polymarkets.
The CFTC unveiled proposals last May aimed at restricting certain event contracts, particularly those related to political events, with support from U.S. lawmakers concerned about election-related gambling risks.
Gemini and Coinbase Push CFTC to Rethink Regulations
Gemini, in an Aug. 8 letter, argued that the proposed rule conflicts with congressional intent under the Commodity Exchange Act (CEA), potentially harming the public interest.
The exchange criticized the proposal for misinterpreting the CEA and broad categorization of all active contracts without specific evidence of harm from prediction markets. Gemini labeled the proposal as a “solution in search of a problem.”
“The notice of proposed rulemaking does not provide a reasonable basis for concluding that prediction markets related to elections or other unknown events are problematic,” the letter states.
Industry Innovation and Public Benefit
Gemini’s co-founder, Cameron Winklevoss, highlighted the importance of decentralized prediction markets, providing valuable insights into future events with financial accountability. Unlike polls, these markets have proven to be reliable tools for predicting future events.
Winklevoss emphasized, “It would be unwise to completely ban a market that has been used for decades and has proven to be a very reliable tool for predicting future events.”
Coinbase’s Response and Industry Growth
Coinbase’s Chief Legal Officer, Paul Grewal, echoed Gemini’s sentiments in urging the CFTC to withdraw the proposal. Grewal criticized the vague definition of “games” and disputed the idea that these markets are against public interest.
“We urge the CFTC to develop a more balanced approach that promotes innovation while protecting the public interest,” Grewal stated.
The rise of prediction platforms, especially for events like the 2024 U.S. presidential election, has seen significant growth. Decentralized platforms like Polymarket have experienced a surge in activity, with trading volumes exceeding $387 million last month according to Dune Analytics.
