Comment Text:
Comment for Proposed Rule 91 FR 12516
April 20, 2026
Michael S. Selig
Chairman
Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street, NW
Washington, DC 20581
Dear Chairman Selig:
At the Financial Services Innovation Coalition FSIC, we believe in applying emerging technology and market innovation to create a more inclusive economy and promote economic empowerment.
Those goals are undermined by prediction markets, which deceive Americans into gambling away their hard-earned money, and especially by the emerging use of leverage on prediction market platforms, making them even riskier for consumers.
Introducing leverage into sports-based prediction markets compounds the risks of traditional sports betting, potentially creating cascading financial losses that extend beyond individual participants.
The Commodity Futures Trading Commission should recognize the systemic risks of financializing sports gambling at scale, especially when these platforms are flouting state laws on consumer safeguards.
There is no shortage of risk in prediction markets. Even though they constitute blatant sports betting, they are not regulated by state gambling agencies that enforce safeguards such as age and identity verification, compliance standards, and enforcement.
The current regulatory structure allows prediction market platforms to deceptively rebrand their gambling activities as “trading” or “investing.”
Because the platforms confuse consumers, 28 percent of sports event contract bettors on prediction markets describe their activity as investing, while 25 percent fund bets from their investment budget, according to the American Gaming Association.
Those risky bets, money not spent on legitimate investments such as retirement accounts, can be costly.
The inherent risks of prediction markets are magnified by leverage, the ability to control a larger position in betting with a relatively small amount of capital.
Since leverage in sports betting leaves traders more exposed to price movements, it can amplify losses. As one investor website put it: “Leverage can be seen as the classic double-edged sword.” On the one hand, it can deliver wild returns in a matter of minutes that would be unattainable in more traditional markets, while on the other, it can rip the rug from underneath your feet and cost you your trading livelihood in no time at all.”
Despite the risks, leverage “is the key feature that’s gaining the most popularity” as some prediction markets develop new features, a recent report found.
Sure enough, according to another recent report, leverage introduces “familiar risks from derivatives markets,” including volatility and “liquidation cascades” – cascading financial losses that create a domino effect.
The high risks of leverage are a key reason the CFTC should prohibit sports event contracts, particularly because they are contrary to the public interest.
Thank you,
Kevin B. Kimble, Esq.
Founder and CEO
Financial Services Innovation Coalition
