Coinbase has urged the U.S. Commodities Futures Trading Commission (CFTC) to withdraw a proposal that could affect prediction markets like Polymarket, according to an Aug. 8 letter.
Coinbase Chief Legal Officer Paul Grewal criticized the proposal for its broad and unclear definition of “gaming” and its claim that “gaming” contracts are against the public interest.
Coinbase argues that the proposal exceeds the Commission’s legal authority and deviates from the standard practice of individually reviewing contracts.
The company also argued that the proposal was economically unsound. Grewal pointed out that the CFTC’s proposal fails to recognize the positive economic impact of prediction markets and lacks evidence to support claims that these markets could harm investors.
The letter stated:
“The proposal questions their scientific value and highlights their potential to harm investors, but without citing evidence to support these conclusions.
As a result, Coinbase called on the CFTC to withdraw or revise the proposal to support responsible innovation, rather than broadly categorizing all event contracts as gaming.
Coinbase claimed:
“We believe this all-or-nothing approach to handling event contracts is inconsistent with promoting responsible innovation and growth in regulated, transparent markets with appropriate safeguards to protect market integrity and protect customers.”
Coinbase’s move received significant support from the crypto community, with CoinFund president Chris Perkins urging the CFTC to “stop stifling innovation and truth.” He added that these platforms are not against the public interest, noting that they provide essential data sets that benefit the public.
The popularity of prediction markets is skyrocketing
Meanwhile, the crypto community’s defense of prediction markets comes as these platforms have gained significant popularity over the past year, especially when betting on events such as the 2024 US presidential election.
Platforms such as Polymarket have seen substantial activity, with total betting volume exceeding $1 billion and more than $550 million in bets on the outcome of the US election alone.
In response to this wave, the CFTC proposed in May to restrict specific event contracts, especially those related to political events, citing concerns about market integrity and the public interest.
Notably, some lawmakers led by Senator Elizabeth Warren recently supported the regulator’s move while criticizing the “commodification” of US elections.