KEY POINTS
- Sen. Warren and other lawmakers have called on the CFTC to push through with the proposed rule
- Gemini's Cameron Winklevoss said decentralized prediction markets have true utility
- Coinbase said the proposed rule could be overstepping on the regulator's statutory authority
Key figures in the cryptocurrency industry are calling on the U.S. Commodity Futures Trading Commission (CFTC) to withdraw its proposed rule that could ban betting on politics through event contracts – contentious contracts that allow consumers to bet on future events with a potential profit. The show of unity came after several lawmakers urged the regulator to ban betting on the November elections.
Policymakers call for political betting ban
Earlier this month, five senators and three House members, including Democratic Sen. Elizabeth Warren, D-Mass., renewed calls for the CFTC to ban betting on the presidential election, saying such a ban would "prevent further corruption of our electoral system by moneyed interests."
"As we approach the 2024 election, voters already face a political system that allows the richest individuals and corporations to funnel dark money into campaigns without disclosure," they wrote in a letter to CFTC Chair Rostin Behnam.
What's on the CFTC proposal?
In its proposed rulemaking notice in May, the commodities regulator said it observed an increase in "event contracts" that are "contrary to public interest." It specifically stated that event contracts involving the following are against the American public's interest: gaming, war terrorism, assassination, and "activity that is unlawful under any Federal or State law."
Some of the crypto industry's most prominent leaders have since come to the defense of event contracts, especially as the U.S. is only around three months away from the 2024 presidential election.
A contradiction to CEA?
Cameron Winklevoss, who co-founded the Gemini exchange with his twin Tyler, published a letter sent to CFTC Secretary Christopher Kirkpatrick, wherein Gemini noted that the proposed rule contradicts Section 5 (C) of the Commodity Exchange Act (CEA).
Decentralized prediction markets are a significant innovation with real public utility. They provide valuable information on future events that is rooted in financial accountability. Unlike polls, pundits, or expert opinions, they require participants to put their money where… pic.twitter.com/Il9tiEyQqW
— Cameron Winklevoss (@cameron) August 10, 2024
Winklevoss explained separately that decentralized prediction markets, such as Polymarket, "are a significant innovation with real public utility" since they provide data "that is rooted in financial accountability." Tyler agreed, saying Americans "should not be denied access to these powerful markets."
A regulatory overreach?
Crypto exchange giant Coinbase said in its letter to the CFTC that banning betting platforms "oversteps the Commission's statutory authority."
Coinbase's chief legal officer Paul Grewal also weighed in on the matter, urging the regulator to collaborate with key stakeholders "to develop a more balanced approach" that both promotes innovation and protects the public's interests.
We urge the CFTC to withdraw this proposal and work alongside academic, industry, and policy stakeholders to develop a more balanced approach that promotes innovation while protecting the public interest. As always, we appreciate the CFTC’s consideration of our response and look…
— paulgrewal.eth (@iampaulgrewal) August 9, 2024
Steve Humenik, Crypto.com's SVP, also submitted a comment to the proposal, saying the regulatory agency "is required to follow the CEA's three-step approach to evaluating event contracts" before proceeding with the rulemaking.
The case of regulatory authority
Jessica Furr and Bryan Edelman of crypto investment firm Dragonfly Digital Management said the regulator should reconsider "the extent of its interpretive authority" in regulating event contracts.
This is not the first time the CFTC's authority and ability to regulate has been doubted. In June, during a subcommittee hearing on the budget, Democratic Sen. Dick Durbin of Illinois said it appears the regulator was "biting off a hell of a lot more than they can chew."
