The U.S. CFTC May Gain Enhanced Authority Over Prediction Markets Through the CLARITY Act

iconKuCoinFlash
Share
AI summary iconSummary
On July 22, the U.S. House Agriculture Committee discussed how the CFTC could regulate prediction markets such as Kalshi and Polymarket, with the CLARITY Act potentially expanding its authority. Carl Kennedy of Katten Muchin Rosenman noted that the CFTC is understaffed and struggling to keep pace with the rapid growth of liquidity and crypto markets. CFTC Chair Rostin Behnam argued that event contracts qualify as swaps under federal law, leading to jurisdictional conflicts with states. Republican lawmakers aim to pass the CLARITY Act before August, while the CFT (Countering the Financing of Terrorism) remains a regulatory concern.

BlockBeats report: On July 22, the U.S. House Committee on Agriculture’s Subcommittee on Commodity Markets, Digital Assets, and Rural Development held a hearing to discuss how the U.S. Commodity Futures Trading Commission (CFTC) could strengthen oversight of prediction market platforms such as Kalshi and Polymarket, and the potential role of the CLARITY Act.


Carl Kennedy, a partner at the New York law firm Katten Muchin Rosenman, stated at the hearing that the CFTC is currently under-resourced and struggling to effectively regulate the rapidly evolving prediction markets and digital assets sector. He believes that if the CLARITY Act is passed, it would grant the CFTC expanded regulatory authority and help it address the "explosive growth" of prediction markets.


Currently, CFTC Chair Michael Selig argues that event contracts on prediction markets fall under the category of swaps regulated by the Commodity Exchange Act, and thus should be subject to the CFTC’s exclusive jurisdiction. This position has sparked a jurisdictional dispute between federal and state regulators, as multiple states have previously filed lawsuits against Kalshi and Polymarket regarding sports betting prediction markets.


Market participants expect that the related case may eventually be brought before the U.S. Supreme Court to clarify the division of authority between federal and state governments over cryptocurrency regulation.


In addition, Republican lawmakers stated that they plan to push for a vote on the CLARITY Act before Congress adjourns in August and will release the bill text soon. In June of this year, the U.S. gaming industry association urged that the CLARITY Act explicitly prohibit event contracts related to sports betting and casino gambling.

Source:Show original
Disclaimer: The information on this page may have been obtained from third parties and does not necessarily reflect the views or opinions of KuCoin. This content is provided for general informational purposes only, without any representation or warranty of any kind, nor shall it be construed as financial or investment advice. KuCoin shall not be liable for any errors or omissions, or for any outcomes resulting from the use of this information. Investments in digital assets can be risky. Please carefully evaluate the risks of a product and your risk tolerance based on your own financial circumstances. For more information, please refer to our Terms of Use and Risk Disclosure.