Comment Text:
Dear Chairman and Commissioners,
My name is Jon Hyman, based in the District of Columbia. I've been active in financial markets for years, and I've used prediction markets a few times to test their value for insight and hedging, and fun. I'm writing in response to the Advance Notice of Proposed Rulemaking on Prediction Markets, as published in 91 FR 12516, to share my perspective. While I see some potential in these markets, I have serious concerns about their current state and believe they need strict regulation to prevent harm.
I recognize that prediction markets can, in theory, help individuals and businesses hedge real risks. For instance, a small business owner might use these markets to offset uncertainty around policy changes or economic data releases, like a new tariff or a CPI report. I've seen academic research, such as studies by economists like Justin Wolfers and Eric Zitzewitz, showing that these markets can aggregate information efficiently, often outperforming polls or expert opinions. That data transparency could be useful for public understanding of complex issues, which is something I value as a trader who relies on good information. I think the CFTC should explore this potential, particularly in response to questions 7 and 8 in the ANPR about balancing innovation with consumer protection.
However, my experience with platforms like Kalshi and Polymarket leaves me deeply troubled. I believe these platforms are little more than under-regulated gambling dens, prone to market distortions and insider trading. Their value to society seems minimal compared to the risks they pose. I've placed trades on prediction markets before, and it often felt less like investing and more like betting, with little oversight to ensure fairness. The idea that these are tools for "price discovery" feels overstated when so many contracts seem designed to attract speculative punts rather than informed hedging. Most users of these markets do so for gambling, not risk hedging. In my view, they should be regulated as gambling or betting operations, with a severely limited range of allowable markets to prevent abuse.
Regarding questions 29 through 32 on inside information, I'm skeptical that informed traders always improve price discovery. The risk of insider trading is real, especially in markets tied to political events or government data. While existing laws ban federal employees from trading on nonpublic information, enforcement seems spotty at best. I worry that without tight controls, these markets could become tools for exploitation rather than public benefit.
I also think the CFTC needs to address state law conflicts, as raised in questions 15 to 22. If prediction markets are seen as gaming by some jurisdictions, that creates a mess for traders like me who operate across state lines. Clarity is essential.
In closing, I urge the CFTC to regulate prediction markets with a heavy hand. Limit the scope of allowable contracts, treat these platforms as gambling unless proven otherwise, and prioritize consumer protection over unchecked innovation. Thank you for considering my input.
Sincerely,
Jon Hyman
