Michael Selig claimed that prediction markets based on blockchain might help people find out more about prices and other public information. This is happening even though some US states are suing the platforms in court, which raises concerns about the regulatory environment and the potential impact on the development and adoption of these innovative technologies, particularly regarding how these legal challenges could hinder investment and innovation in the blockchain space.
Michael Selig, the chair of the US Commodity Futures Trading Commission (CFTC), has said that prediction markets combined with blockchain technology might be very useful for finding the truth.
Prediction markets described as “Truth Machines”
At the FIA Global Cleared Markets Conference in Boca Raton, Florida, on Monday, Selig said that prediction markets, which are also called event contracts, can give us useful information about what will happen in the future when people put money behind their views. He called well-functioning markets truth machines.
When people put money behind their opinions about future events, they make them accountable, open, and informed. He also said that prediction markets with a lot of money typically give signals that the public trusts more than regular opinion surveys.
The truth is that people now think prediction market platforms are more accurate than political polls. He used the 2024 US presidential election as an example of how market pricing showed the enormity of the event.
US states take legal action against prediction platforms
Several US states have taken legal or regulatory action against prediction markets, saying that their event-based contracts are like gambling without a licence. Selig supports these markets.
Two federal court decisions this week let Nevada regulators keep going after Polymarket and Kalshi, two prediction market sites, in court. In February, the state sued Kalshi after the prediction market operator lost its court case to halt the state’s regulator from taking action against its sports prediction markets.
Massachusetts has also taken action by suing Kalshi for sports prediction contracts that it sold to people in the state. Connecticut regulators, on the other hand, sent Kalshi and Robinhood cease-and-desist letters telling them to stop issuing some event contracts that were linked to sports outcomes.
CFTC plans clearer rules for event contracts and crypto
The head of the CFTC said that the agency wants to make the rules for how event contracts can be registered and traded under the regulator’s framework clearer. He stated that staff have been told to write up rules for how these markets should work while still following the rules that are already in place for derivatives.
The chair of the CFTC wants to make it easier to tell what kind of crypto assets are what. Selig also noted that the CFTC wants to make it easier to understand how rules relate to developers of non-custodial software, which is an application that allows users to manage their own assets without relying on a third party, like digital wallets and decentralised finance apps (DeFi).