In brief
- The CFTC introduced an Innovation Task Force designed to help create a clear regulatory framework for derivatives markets in crypto, AI, and prediction markets.
- The task force is the latest endeavor from the regulator that aims to support innovation while making America the home for the “future of finance.”
- The task force will coordinate with other federal agencies like the SEC and its own Crypto Task Force.
The United States Commodity Futures Trading Commission (CFTC) wants to create clear rules within U.S. derivatives markets for those building with new technologies, and has unveiled a new task force to help do so.
The newly established CFTC Innovation Task Force will work alongside the Commission to develop those frameworks specifically for builders in crypto and blockchain, artificial intelligence and autonomous systems, and prediction markets.
“By establishing a clear regulatory framework for innovators building on the new frontier of finance, we can foster responsible innovation at home and ensure American market participants are not left on the sidelines,” said CFTC Chairman Michael Selig, in a statement.
The task force will be led by Selig’s senior advisor, Michael J. Passalacqua, and said it will coordinate with agencies like the SEC and the SEC’s Crypto Task Force on innovation initiatives.
“Under Chairman Selig, the Innovation Task Force (ITF) will provide clarity to builders by advancing the CFTC’s innovation agenda across crypto, AI, and prediction markets,” Passalacqua posted on X.
The regulator has been busy in March, particularly as it relates to its relationship with prediction markets and their rapid growth. Under Selig’s leadership, it recently published a letter that guided registered exchanges on compliance and product requirements for event contracts, those used on prediction market platforms like Kalshi and Polymarket.
The CFTC is also inviting public comment about whether or not it needs to amend or write new rules on prediction market oversight.
Those moves come amid intensifying scrutiny around prediction markets, highlighted by a push by Democratic lawmakers and concerns over insider trading and event contracts tied to things like terrorism and war.
To that end, both Kalshi and Polymarket made public moves on Monday to address insider trading on their platforms. For Kalshi, that meant adding preemptive screening for politicians and individuals working in sports and ensuring they cannot trade on markets related to them.
Similarly, Polymarket took steps to clarify its rules around insider trading as it enhanced its market integrity terms.
The regulator has remained adamant that it is the governing body for prediction markets, with Chairman Selig recently saying to those that challenge the CFTC over jurisdiction—including states—that his agency would “see you in court.”
The remark comes as states begin to challenge prediction markets over their offerings, like in Arizona, where the state filed charges against Kalshi for allegedly running an illegal gambling operation. Also last week, Nevada secured a temporary ban against Kalshi, blocking the startup from offering sports, politics, and entertainment event contracts in the state for at least 14 days.
Earlier this month, the CFTC signed a memorandum of understanding (MOU) with Major League Baseball, which will see the parties work together to limit markets that may pose “integrity risk.”
Beyond prediction markets, the CFTC made a major ruling last week that gives self-custodial wallet Phantom the ability to offer its users access to derivatives markets without registering as a broker.
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