Comment Text:
Dear Chairman and Commissioners,
My name is Eric Smallwood, and I'm a business owner from Michigan. I'm writing to share my thoughts on the Advance Notice of Proposed Rulemaking on Prediction Markets, as published in 91 FR 12516. I strongly support the proportionate regulation of prediction markets and believe they provide real value to people like me, as well as to the broader economy.
As a small business owner, I've used prediction markets a few times to get a sense of potential risks that could impact my operations. For instance, I've looked at contracts tied to economic indicators or policy changes that could affect my supply chain costs or customer demand. These markets give me a unique perspective I can't find in news articles or analyst reports. The aggregated information in the prices helps me make better decisions, whether it's timing a big purchase or planning for the year ahead. I believe this kind of insight isn't just helpful to me, but to anyone trying to navigate uncertainty, from other business owners to regular citizens.
I also value the freedom to participate in legal, regulated markets. Platforms like Kalshi, which operate under CFTC oversight, offer a safe and transparent way to engage. I've seen unregulated offshore alternatives out there, and they worry me. Without proper oversight, there's no accountability for fraud or manipulation. If the CFTC over-restricts or bans prediction markets, I fear it will push activity to these less safe venues, putting consumers at greater risk. Regulation, not prohibition, is the answer to protect people like me.
I'm also concerned about U.S. competitiveness in financial innovation. If we stifle prediction markets here, other countries will step in to fill the gap. We should be leading the way, not falling behind. On a related note, I think the CFTC already has strong tools to handle issues like manipulation and insider trading in other derivatives markets. Those same tools can be adapted here without needing broad bans. And honestly, informed trading isn't a bad thing. It improves price discovery, which benefits everyone by making the market's predictions more accurate.
I'd like to address a couple of specific questions from the ANPR. On Question 7, regarding balancing innovation and consumer protection, I think regulated markets strike that balance by fostering innovation while providing safeguards. On Question 29, about informed traders and price discovery, I believe their participation makes the market's information more reliable, as long as existing laws against insider trading are enforced.
In closing, I urge the CFTC to support well-regulated prediction markets with proportionate rules. Don't ban or overly restrict them. They offer real value for hedging risks and accessing unique information, and with proper oversight, they can thrive safely in the U.S.
Sincerely,
Eric Smallwood
