Coinbase urges CFTC to regulate prediction markets under existing framework

Coinbase has told the Commodity Futures Trading Commission (CFTC) that prediction markets can be regulated under existing derivatives rules, as the agency considers how to oversee event-based contracts tied to real-world outcomes.

In a letter dated April 30 to the CFTC, Chief Policy Officer Faryar Shirzad said the company was responding to the regulator’s Advanced Notice of Proposed Rulemaking on prediction markets. The initiative seeks input on how to treat contracts linked to economic, political, and other outcomes as trading activity expands.

“Prediction markets have fast become one of the most dynamic areas of derivatives markets,” Shirzad wrote. He added that their growth “reflects genuine demand from market participants for instruments that aggregate information, enable hedging on economically consequential events, and democratize access to predictive data.”

Existing rules seen as sufficient

Coinbase said event-based contracts fall within the CFTC’s current authority and do not require new legislation or rulemaking. Shirzad described such contracts as “not new,” noting that derivatives markets have long incorporated real-world contingencies.

The company outlined a series of key points in its submission. It said prediction markets “sit comfortably within existing statutory authority—no new mandate required,” and function similarly to futures by aggregating dispersed information into prices and allowing participants to hedge uncertainty.

Coinbase also warned against fragmented oversight, stating that Congress assigned derivatives regulation to the CFTC to ensure consistent national supervision. “Fragmented state-by-state intervention risks undermining that framework and creating regulatory conflict in markets that are inherently interstate,” the company said.

The letter further noted that the CFTC already has authority to “review, condition, or prohibit contracts that are contrary to the public interest,” including those vulnerable to manipulation or harm. Coinbase said that authority should be used to address specific cases rather than restrict the broader category of prediction markets.

Focus on oversight, not new mandates

Shirzad said the regulator should refine its existing framework while maintaining market integrity, including “aggressively pursuing insider trading.”

In the letter, Coinbase urged the commission to clarify how it would apply its authority under the Commodity Exchange Act, ensure that customers receive consistent protections whether trading directly on a Designated Contract Market (DCM) or through an intermediary, and update guidance on how DCMs determine that a contract is not readily susceptible to manipulation.

“The question is not whether they fit within the law—they do—but how to ensure they develop with integrity, clarity, and appropriate guardrails,” Coinbase said.

The company added that it “appreciates the opportunity to submit feedback on the Commission’s consideration of prediction markets” and said it looks forward to continued engagement.

Other firms weigh in on market direction

Coinbase is among several firms that have submitted responses to the CFTC. Venture capital firms Andreessen Horowitz (a16z) and Paradigm also provided input as part of the rulemaking process.

Miles Jennings, head of policy at a16z, described prediction markets as “one of the most powerful tools we have for turning dispersed knowledge into actionable information.” He added: “Unlike polls, they're continuous and incentivized. Participants put money behind their beliefs, so prices reflect genuine conviction, not casual opinion.”

Jennings pointed to rapid growth in the sector, noting that Kalshi's average weekly volume surged tenfold this year to $3 billion. He also said that advances in artificial intelligence and blockchain technology could expand the role of such markets.

“Prediction markets aren't just about placing bets on events. They're information machines,” Jennings said.

At the same time, he cautioned that regulatory uncertainty could affect future development. “The rules the CFTC writes now will determine whether this technology is constrained in its infancy or allowed to reach its potential,” he said.

Debate intersects with gambling concerns

Prediction markets have drawn attention from lawmakers and regulators, some of whom argue such products resemble “illegal gambling.” That overlap has made the sector relevant to gambling operators and policymakers evaluating distinctions between financial derivatives and wagering.

The CFTC’s review is expected to address whether additional guardrails are needed as participation grows. Coinbase, however, maintains that the existing framework is sufficient if applied consistently.