The U.S. Commodity Futures Trading Commission has issued a "no-action letter" to a group of prediction markets, exempting them from requirements related to swap data reporting and record-keeping regulations.
According to a statement released by the Market Oversight Division and the Clearing and Risk Division on Thursday, these entities will not face enforcement actions for failing to meet certain record-keeping requirements, as long as they adhere to other specific obligations.
They added, "The no-action letter applies only to narrow circumstances and is comparable to no-action letters issued to other similarly designated contract markets and derivatives clearing organizations."
Companies receiving the no-action letter include Polymarket US, LedgerX, PredictIt, and the prediction market division of cryptocurrency exchange Gemini, known as Gemini Titan.
According to the letter, to avoid enforcement, these platforms must ensure that all their contracts are fully collateralized by reserve assets and must publish the timing and transaction data of all event contract trades on their websites, which must be done "after the execution of the trade."
Prediction markets and event contracts allow traders to establish positions on the outcomes of various events, including sports events and unconventional topics such as the clothing choices of political figures.
Since prediction markets are regulated as designated contract markets in the U.S., these contracts trigger extensive reporting and record-keeping obligations; however, the no-action letter has now exempted them from facing immediate enforcement risks for failing to meet these obligations.
The no-action letter means that under very specific conditions, even if the requester does not comply with certain regulations, CFTC staff will not recommend enforcement; however, it does not change the law and is typically used to temporarily reduce regulatory risks during the evolution of markets or products.
This year, prediction markets have become one of the most popular crypto products, with trading volumes on platforms like Kalshi and Polymarket frequently recording billions of trades.
According to decentralized data aggregator DefiLlama, Kalshi's trading volume over the past 30 days was $5.14 billion. In contrast, as a cryptocurrency-based prediction market, Polymarket recorded $1.9 billion in trading volume over the past 30 days.
Other participants have also begun to enter this space. Crypto.com recently launched a prediction market platform, planning to integrate with Trump Media; meanwhile, tech researcher Jane Manchun Wong stated on November 19 that website data indicates Coinbase is also building a prediction market platform.
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Original: “CFTC Allows Prediction Markets Greater Flexibility on Data and Record-Keeping Rules”
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