a16z Supports CFTC Against State Actions Targeting Prediction Markets

On May 2, venture capital firm a16z expressed support for the U.S. Commodity Futures Trading Commission (CFTC) in opposing a series of actions by various states aimed at suppressing prediction markets. On Friday, a16z submitted an 18-page comment letter to the CFTC, stating that the actions taken by state regulators against prediction market platforms—including cease-and-desist orders and proposed bans—are creating “serious barriers to fair access for users.” In just the past month, the CFTC has filed a series of lawsuits against Illinois, Arizona, Connecticut, New York, and Wisconsin, arguing that these states are attempting to regulate markets overseen by the federal government, exceeding their jurisdiction. a16z contended that requiring trading platforms to block U.S. users based on their state of residence conflicts with the CFTC’s rules on fair market access. The company wrote: “Being forced to deny fair access to users from states seeking to license or ban certain event contracts could severely compress available liquidity.” CFTC Chairman Mike Selig argued that event contracts in prediction markets fall under the category of swap contracts, placing them within the CFTC’s “exclusive jurisdiction.” State regulators and attorneys general countered that platforms like Kalshi and Polymarket offer unlicensed gambling products. a16z also discussed the utility it claims prediction markets provide, stating that their pricing mechanism is a “unique form of price discovery” that helps to “reveal the probabilities of uncertain events.” The company further argued that blockchain-based prediction markets are more transparent than traditional platforms, asserting that the “auditability of on-chain transactions” makes it easier for participants and regulators to oversee. In April, the cumulative trading volume of prediction markets Polymarket and Kalshi surpassed $15 billion.