Comment Text:
Dear Chairman and Commissioners,
My name is William Kelbaugh, and I'm a lawyer based in Georgia. I'm writing in response to the Advance Notice of Proposed Rulemaking on Prediction Markets, as published in 91 FR 12516. As someone who actively trades on platforms like Kalshi, I strongly support the development of well-regulated prediction markets, and I appreciate the opportunity to share my perspective on how the CFTC can approach this emerging space.
I rely on prediction markets for accurate forecasting of elections and other public events. In my experience, the prices on these platforms consistently outperform polls or pundits in predicting outcomes. This isn't just useful for traders like me; it provides better information for public decision-making and price discovery. I also use these markets to hedge personal financial risks. For instance, I've taken positions on sporting event outcomes to offset costs related to travel for games. If my team doesn't make it, I might not want to attend, and a prediction market contract helps me mitigate that loss. This isn't gambling; it's a legitimate economic tool, much like hedging in other derivatives markets.
I'm particularly concerned with maintaining freedom to participate in legal, regulated environments. Platforms like Kalshi, under CFTC oversight, are far safer than unregulated offshore alternatives. Banning or overly restricting prediction markets won't eliminate demand; it will push activity to less transparent venues where consumer protections are nonexistent. I've seen regulated sportsbooks with pricing structures that feel far more predatory than anything on prediction markets. The CFTC already has robust tools to address manipulation and insider trading in other markets, and these can be adapted here without resorting to broad categorical bans. Proportionate, targeted regulation is the better path.
Regarding some of your specific questions, Id like to address Topic B on Public Interest, particularly Question 7 about balancing innovation and consumer protection. Regulated prediction markets strike that balance by fostering innovation in price discovery while offering oversight that protects participants. On Topic E, Question 29 about inside information, I believe informed trading actually improves price accuracy and benefits all market participants, as long as existing laws against insider trading by federal officials are enforced. Finally, on Topic C, Question 15 regarding defining gaming versus legitimate markets, I urge the CFTC to recognize that event contracts serve real economic purposes like hedging and should not be classified as gambling.
I ask that the CFTC support proportionate regulation of prediction markets. Don't ban or over-restrict them. Focus on targeted rules to address specific risks while preserving the benefits these markets provide to individuals, businesses, and society at large. Thank you for considering my input.
Sincerely,
William Kelbaugh
