Comment Text:
Dear Chairman and Commissioners,
My name is Sam Pass, and Im a trader and investor based in Pennsylvania. Ive been actively trading on prediction markets like Kalshi and Polymarket for a while now, and Im writing in response to the Advance Notice of Proposed Rulemaking on Prediction Markets (91 FR 12516). I strongly support the proportionate regulation of these markets, and I want to share why theyre valuable to me and to society, while addressing some of the concerns raised in your questions.
As a trader, Ive seen firsthand how prediction markets produce forecasts that often beat polls or pundits. Whether its an election outcome or a major policy shift, the prices on these platforms give me information I cant get elsewhere. This isnt just useful for me; it helps everyone, from regular folks to policymakers, make better decisions. I also use these markets to hedge real risks, like political events that could impact my investments or business costs. This isnt gambling. It takes research and judgment, just like trading stocks or commodities. Classifying event contracts as gaming undercuts their legitimate economic purpose, and I urge you to recognize this in response to Questions 15-22 on listed activities.
Im also concerned about the idea of banning or over-restricting certain products, like multi-leg event contracts or combos. The question isnt whether these products exist; its where they exist. Banning them on CFTC-regulated venues like Kalshi doesnt eliminate demand. It just pushes activity to offshore platforms or state-licensed sportsbooks with outrageous fees, often 25-40% holds, and no federal oversight. On a regulated exchange, I pay a tighter spread, and the CFTC can enforce rules like position limits or self-exclusion to address problem gambling. Prohibition means losing that control. I think this ties directly to Questions 7-14 on public interest, where you ask about balancing innovation and consumer protection. Regulated markets are far safer than the alternatives. Additionally, the implicit assumption behind treating event contracts more skeptically than equity derivatives is that financial markets reflect informed participation while sports markets reflect uninformed speculation. The reality runs the other way. The median retail buyer of weekly call options on a single stock has, in most cases, never read the company's 10-K, cannot describe its revenue mix, and has no informed view on the catalyst being traded. The median bettor on an NFL game has watched the teams play, knows the personnel, follows the injury report, and has a coherentif not always correctthesis on the matchup.This inverts the usual paternalism frame. Retail engagement with sports markets reflects more genuine fundamental knowledge of the underlying than retail engagement with single-name options markets does. If the Commission permits the latter on the principle that Americans are entitled to take risk on subjects they understand and care about, that principle applies with equal or greater force to event contracts on sports.
On insider trading and manipulation, raised in Questions 29-32, I believe the CFTC already has the tools to tackle bad actors. Federal laws already ban trading on nonpublic information, and your existing authority covers market manipulation. Shutting down entire markets to stop a few cheaters punishes everyone else. Plus, informed trading often improves price discovery, benefiting all participants. Instead of broad bans, target specific risks with focused rules.
Finally, I want to stress that the U.S. should lead in financial innovation. If we over-regulate or ban prediction markets, were just handing the future to other countries. Proportionate regulation, not categorical restrictions, is the way forward. This speaks to Questions 33-40 on classification and costs. Dont let regulatory burdens on small entities or misguided gaming labels stifle a valuable tool.
I ask the CFTC to support well-regulated prediction markets that allow everyday people like me to participate, hedge risks, and access better information, while keeping activity onshore under your oversight. Thank you for considering my perspective.
Sincerely,
Sam Pass
