Comment Text:
I urge the Commission to approach the expansion or authorization of prediction markets with extreme caution. While these platforms are often marketed as “information markets” or “exchange markets,” their core function is indistinguishable from gambling. The rebranding obscures the true nature of the activity and risks normalizing a form of wagering that carries significant social and economic harms.
1. Susceptibility to Insider Manipulation
Prediction markets create direct financial incentives for individuals with privileged or non‑public information to influence outcomes. Unlike traditional financial markets—where insider trading is prohibited and monitored—prediction markets often lack comparable safeguards. This creates a structural vulnerability: those closest to political campaigns, corporate decisions, or regulatory processes can profit by shaping events rather than forecasting them. This undermines both market integrity and public trust.
2. Ethical Concerns About Betting on Real‑World Harm
Many prediction markets involve outcomes that directly affect people’s lives, such as elections, public health events, or corporate layoffs. Allowing individuals to profit from these outcomes raises serious ethical concerns. It encourages perverse incentives, where participants may benefit from societal instability, misinformation, or negative events. This is fundamentally different from hedging risk in commodity or financial markets; it is gambling on human and civic well‑being.
3. Gambling Addiction and Public Health Risks
Prediction markets operate using the same psychological mechanisms as sports betting and online casinos. They encourage rapid wagering, variable rewards, and compulsive participation. Expanding these markets would inevitably increase exposure to gambling addiction, a well‑documented public health issue. Framing these platforms as “markets” rather than gambling products risks misleading consumers and weakening the stigma that helps protect vulnerable individuals.
4. Access by Minors and Teens
Online prediction platforms are easily accessible, and age‑verification systems are often weak or inconsistent. Teenagers—already heavily exposed to online gaming, loot boxes, and micro‑transactions—are particularly vulnerable to gambling‑like systems. Without strict regulatory controls, prediction markets could become yet another entry point into addictive financial behavior for young people.
5. Misleading Terminology and Consumer Confusion
Calling these platforms “exchange markets” or “information markets” implies a level of economic utility and legitimacy that does not reflect their actual function. Unlike commodity or derivatives markets, prediction markets do not facilitate price discovery for goods or services. Their primary purpose is wagering. Clear and accurate terminology is essential to prevent consumer misunderstanding and to ensure that regulation reflects the true nature of the activity.
Conclusion
Prediction markets pose significant risks: manipulation by insiders, ethical concerns about profiting from real‑world harm, gambling addiction, exposure to minors, and widespread consumer confusion driven by misleading terminology. For these reasons, I urge the Commission to adopt a highly cautious regulatory posture and to treat prediction markets as gambling products rather than financial instruments.
