Gemini and Coinbase challenge CFTC rules on prediction markets
The two largest U.S. cryptocurrency exchanges, Gemini and Coinbase, are pushing back against the rules proposed by the U.S. Commodity Futures Trading Commission (CFTC) that aim to restrict prediction markets like Polymarkets.
Last May, the CFTC unveiled proposals to limit certain event contracts, especially those related to political events, with support from U.S. lawmakers, including Senator Elizabeth Warren, who are concerned about the risks associated with election-related gambling.
Gemini and Coinbase call for withdrawal of CFTC proposal
In an Aug. 8 letter, Gemini contended that the proposed rule contradicts the congressional intent outlined in the Commodity Exchange Act (CEA). The exchange believes that the rule is detrimental to the public interest and may misunderstand the objectives of the CEA.
Gemini raised concerns that the proposal misinterprets the CEA by broadly categorizing all active contracts and potentially infringing on Congress’ intent for the CFTC to assess individual contract certifications. The exchange also critiqued the proposal as a “solution in search of a problem,” noting the absence of concrete evidence demonstrating harm caused by prediction markets.
The importance of decentralized prediction markets
Gemini co-founder Cameron Winklevoss emphasized the significance of decentralized prediction markets as an innovative tool with tangible public benefits. These markets offer valuable insights into future events supported by financial accountability. Unlike traditional polls or expert opinions, participants in prediction markets have a financial stake, which enhances the accuracy of the information provided.
Winklevoss stated, “It would be unwise to completely ban a market that has been utilized in various forms for decades and proven to be a reliable tool for predicting future events.”
Gemini concluded that if the Commission proceeds with the rule, it is likely to face significant legal challenges. Coinbase also echoed Gemini’s call for the withdrawal of the CFTC proposal.
