Enforcement director of the Commodity Futures Trading Commission (CFTC), David Miller, has made his first public statement regarding prediction markets, stressing that they should be treated as derivatives, not gambling, making them subject to federal laws, including insider trading rules. The CFTC’s position is that event contracts fall under federal supervision, meaning that state-level gambling
Enforcement director of the Commodity Futures Trading Commission (CFTC), David Miller, has made his first public statement regarding prediction markets, stressing that they should be treated as derivatives, not gambling, making them subject to federal laws, including insider trading rules.
The CFTC’s position is that event contracts fall under federal supervision, meaning that state-level gambling rules cannot apply to them. The clear definition is connected to the debate between the commission and U.S. state regulators who claim that prediction markets should be treated as gambling under state jurisdiction.
Miller commented:
“Our position is that event contracts are not gaming. The event contracts at issue are swaps. Insider trading law applies.”
Miller also revealed how insider trading rules would be applied to the prediction market sector, saying that brokers, fintech firms, and other participants will be expected to comply with the standards that are used in other derivatives markets, especially those connected to the use of non-public information.
Miller added:
“Unfortunately, there’s a myth in mainstream media and social media that insider trading doesn’t apply in the prediction markets. That is wrong. We will only be prosecuting cases against those who tip or trade with misappropriated information.”
He also noted that the agency is looking to move away from reliance on enforcement action and wants to start offering better incentives, like reduced penalties, for companies and individuals to cooperate with investigations.