A16z has thrown its support behind the Commodity Futures Trading Commission (CFTC) in a growing federal-state standoff over prediction markets, opposing state regulators attempting to shut down platforms like Kalshi and Polymarket.
The heavyweight of venture capital submitted » the letter Thursday in response to the CFTC’s advance notice of proposed rulemaking on prediction markets. He argues that state-level enforcement actions, ranging from cease-and-desist letters to criminal charges, create obstacles that undermine the federal agency’s mandate to provide “impartial access to its markets and services.”
In recent weeks alone, the CFTC filed suit against Illinois, Arizona, Connecticut, new York and Wisconsin, claiming that these states had exceeded their trying to regulate markets which fall under federal jurisdiction. A16z supported this position, arguing that forcing exchanges to block users based on their state of residence directly conflicts with the CFTC’s impartial access rules.
“Being forced to deny unbiased access to users in states seeking to license or prohibit certain event contracts will likely significantly limit available liquidity,” the company wrote.
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CFTC defines the game: A16z
State attorneys general have countered that platforms offering deals on sports scores and political events are running unlicensed gaming operations. A16z objected to this framework, arguing that it is the CFTC, not state legislatures, that holds the authority to define what constitutes “gambling” under the federal Commodities Act, given the agency’s decades of oversight of event-driven contracts.
Beyond the jurisdictional struggle, a16z has also argued for the social value of prediction markets, describing their pricing mechanisms as a distinct form of price discovery that surfaces intelligence about uncertain outcomes. The company has also shown support for blockchain-based platforms, saying that the verifiability of on-chain transactions makes regulatory oversight more effective.
Trading volume of Kalshi and Polymarket. Source: Token terminal
The letter comes amid the growing popularity of these platforms. As reported by Cointelegraph, the monthly trading volume reached $25.7 billion in Marchwith over 80% of users classified as retail, defined as those trading less than $10,000.
Related: Kalshi and Polymarket among 27 prediction platforms banned in Brazil
Polymarket wants to return to the United States
Polymarket is in talks with the CFTC to lift the ban which has kept U.S. users off its main platform since a 2022 settlement, in which the company paid a $1.4 million penalty and agreed to block U.S. customers for unregistered event contracts.
A full return would require a formal vote by the commission, although the process could move more quickly given that four of the CFTC’s commissioner seats are currently vacant.
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