BlockBeats news, on May 2, the venture capital firm a16z supported the U.S. Commodity Futures Trading Commission (CFTC) in opposing a series of state-level actions targeting prediction markets. On Friday, a16z submitted an 18-page comment letter to the CFTC, stating that state regulators’ actions against prediction market platforms—including cease-and-desist orders and proposed injunctions—are creating “serious barriers to fair access” for users. Over the past month alone, the CFTC has filed a series of lawsuits against Illinois, Arizona, Connecticut, New York, and Wisconsin, asserting that these states have overstepped their jurisdiction by attempting to regulate markets under federal oversight.
a16z argues that requiring exchanges 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 in states that seek to license or prohibit certain event contracts could severely compress available liquidity.” CFTC Chair Mike Selig contends that event contracts on prediction markets qualify as swaps and fall under the CFTC’s “exclusive jurisdiction.” State regulators and state attorneys general, however, counter that platforms such as Kalshi and Polymarket are offering unlicensed gambling products.
a16z also discussed the utility provided by what it calls prediction markets, stating that their pricing mechanism represents a "unique form of price discovery" that helps "reveal the probabilities of uncertain events." The company further argues that blockchain-based prediction markets are more transparent than traditional platforms, noting that the "auditability of on-chain transactions" makes it easier for participants and regulators to monitor activity. In April, the cumulative trading volume of prediction markets Polymarket and Kalshi surpassed $150 billion.