U.S. Sen. Kirsten Gillibrand is calling for stronger federal oversight of prediction markets, arguing that the rapidly growing industry needs additional safeguards to protect consumers and prevent insider trading and market manipulation.
Gillibrand joined 15 Senate colleagues in urging the Commodity Futures Trading Commission to strengthen regulation and enforcement as the agency considers new rules governing prediction markets.
Prediction markets allow participants to buy and sell contracts tied to the outcome of future events, including elections, economic indicators and other public developments. The sector has expanded rapidly over the past 18 months, drawing increased participation from retail investors and attracting greater scrutiny from lawmakers and regulators.
In a letter to CFTC Chairman Michael Selig, the senators said the growing popularity of the markets has created new consumer protection concerns. They cited reports of potential insider trading and manipulation, arguing that existing oversight may not be sufficient to address emerging risks.
The lawmakers urged the commission to establish clearer standards for which event contracts can be listed for trading. They specifically raised concerns about contracts tied to events that could be influenced by a small number of individuals or situations where participants may have access to nonpublic information before an outcome becomes public.
The senators also called for greater scrutiny of exchanges and clearing organizations that operate prediction markets, arguing that regulators should ensure those entities have adequate compliance, surveillance and enforcement programs in place.
In addition, the letter recommends stronger review of contract design and payout structures to reduce customer confusion and disputes when contracts are settled.
Gillibrand said financial markets should be fair and transparent and that regulators must adopt safeguards that protect retail investors while maintaining confidence in the integrity of prediction market platforms.
The push follows legislation introduced by Gillibrand earlier this year that would create a federal framework for prediction markets, prohibit elected officials from trading on them and establish additional consumer protections for participants.
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