CFTC to Review Prediction Markets and Launch Digital Asset Pilot

The U.S. Commodity Futures Trading Commission (CFTC), under Acting Chair Caroline Pham, is hosting two major initiatives to address regulatory approaches in emerging markets.

The first is a public roundtable to review the regulation of prediction markets, which could impact platforms such as Kalshi and Polymarket. This roundtable will gather input from market participants, legal experts, and stakeholders to discuss the legality of event contracts under the Commodity Exchange Act, consumer protection concerns, and potential regulatory changes.

The review will also cover sports-related event contracts. Kalshi has faced regulatory hurdles, including the CFTC's decision to block its election-related contracts in 2023, while Polymarket was fined $1.4 million in 2022 for offering unregistered swaps. Public comments and participation requests for the roundtable are due by February 21. Pham has criticized the commission's previous stance on prediction markets, describing it as a 'sinkhole of legal uncertainty' that hindered innovation.

The second initiative is a Crypto CEO Forum to launch a pilot program for digital asset markets. This program will explore the use of tokenized non-cash collateral, such as stablecoins, through distributed ledger technology. Participants in the forum will include leaders from Coinbase, Ripple, and Circle. Pham, who was appointed by President Donald Trump, emphasized the importance of 'responsible innovation' and aims to position the U.S. as a leader in digital asset markets. Further details on the forum, including its date, are yet to be announced.

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