Senators tell CFTC prediction market contracts need clear guidance

Six Democratic senators told the Commodity Futures Trading Commission in a previously unreported letter that they have strong concerns about prediction market contracts “that incentivize physical injury or death,” saying the contracts “present dangerous national security risks.”

The senators urged CFTC Chairman Michael Selig in the letter sent Monday to “clearly reiterate that the CFTC will categorically prohibit any contract that resolves upon or closely correlates to an individual’s death.”

The letter notes that under federal commodity regulations, the CFTC already “categorically prohibits” contracts that involve or reference terrorism, assassination, war or similar actions.

The letter was sent as prediction markets such as Polymarket and Kalshi have become increasingly popular and as questions have been raised about how those markets should be regulated, whether they are contributing to a rise in gambling addiction, and about the risk of people with inside information taking positions on contracts.

The letter notes that the CFTC “has cleared the way” for Polymarket to reenter the U.S. market after U.S. users being ostensibly blocked from accessing contracts on the company’s offshore exchange.

The Democrats who signed the letter are Sens. Adam Schiff of California, Richard Blumenthal of Connecticut, New Jersey’s Cory Booker, Tim Kaine of Virginia, and Nevada’s Catherine Cortez Masto and Jacky Rosen.

The CFTC didn’t immediately respond to a request for comment about the letter, which cites three contracts offered by Polymarket in recent months relating to a NASA spaceship launch, the fate of Venezuela’s authoritarian leader, and Russia’s invasion of Ukraine.

“These recent events highlight the lack of internal controls and safeguards to prevent insiders from profiting off of non-public information, and direct profiteering off of human suffering,” the letter said.

The CFTC last week filed a legal brief in a federal appeals court asserting that the commission has exclusive jurisdiction over the U.S. commodity derivatives markets and that individual states had no role in exercising such oversight.

“The CFTC will no longer sit idly by while overzealous state governments undermine the agency’s exclusive jurisdiction over these markets by seeking to establish statewide prohibitions on these exciting products,” Selig wrote in a Wall Street Journal op-ed about the filing.

The senators’ letter noted that one of Polymarket’s contracts asked if Artemis II, the upcoming NASA crewed spaceflight mission, would explode.

That contract, which Polymarket listed on Jan. 20, saw the bet “Yes” trading as high as 8% before it “was subsequently renamed and ultimately withdrawn due to public…