Coinbase has taken a firm stance against a proposal put forth by the US Commodities Futures Trading Commission (CFTC) that could impact prediction markets like Polymarket. The Chief Legal Officer of Coinbase, Paul Grewal, raised concerns about the proposal’s vague definition of “gaming” and its claim that contracts related to prediction markets are contrary to the public interest.
In the letter addressed to the CFTC, Coinbase argued that the proposed regulations go beyond the Commission’s legal authority and depart from the conventional practice of assessing contracts on an individual basis. The company contended that the proposal lacks a sound economic basis and fails to acknowledge the positive contributions of prediction markets to the economy.
One of the main criticisms highlighted by Coinbase was the absence of substantial evidence to support the CFTC’s claims that prediction markets could potentially harm investors. The letter emphasized that the proposal cast doubt on the scientific validity of these markets without providing concrete proof.
Coinbase called on the CFTC to reconsider or withdraw the proposal in order to foster responsible innovation and growth in regulated markets. The company emphasized the importance of allowing for the development of transparent markets with adequate safeguards to protect both market integrity and customer interests.
The crypto community rallied behind Coinbase’s plea, with notable figures like Chris Perkins, the President of CoinFund, urging the CFTC to embrace innovation rather than stifle it. Perkins argued that prediction markets offer valuable datasets and serve the public interest by providing critical information.
The defense of prediction markets by the crypto community comes at a time when these platforms have experienced a surge in popularity, especially in relation to events such as the upcoming US presidential election. Platforms like Polymarket have seen significant activity, with billions of dollars in betting volume, raising concerns among regulators about market integrity.
In response to the growing interest in prediction markets, the CFTC proposed restrictions on certain event contracts, particularly those tied to political outcomes. This move was supported by some lawmakers, including Senator Elizabeth Warren, who criticized the “commodification” of US elections and the potential risks posed by unregulated prediction markets.
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