a16z Backs CFTC, Opposes State-by-State Crackdowns on Prediction Markets

Venture capital firm a16z has backed the U.S. Commodity Futures Trading Commission (CFTC) in pushing back against several states’ crackdowns on prediction markets. Last Friday, the firm submitted an 18-page comment letter to the CFTC, arguing state regulatory actions—including cease-and-desist orders and proposed bans—are creating “significant barriers to fair access” for users. In just the past month, the CFTC has sued Illinois, Arizona, Connecticut, New York, and Wisconsin, claiming those states are overstepping their authority by trying to regulate markets under federal oversight. a16z contends requiring trading platforms to block U.S. users based on their state of residence conflicts with CFTC rules on fair market access. “Forcing platforms to deny fair access to users in states seeking to license or ban certain event contracts could significantly reduce available liquidity,” the firm wrote. CFTC Chair Mike Selig argues prediction market event contracts qualify as swaps, placing them under the CFTC’s “exclusive jurisdiction.” State regulators and attorneys general, however, say platforms like Kalshi and Polymarket offer unlicensed gambling products. a16z also highlighted prediction markets’ utility, noting their pricing mechanism is a “unique form of price discovery” that helps “reveal the probability of uncertain events.” The firm added blockchain-based prediction markets are more transparent than traditional platforms, with “auditability of on-chain transactions” making supervision easier for participants and regulators alike. In April, cumulative trading volume for Polymarket and Kalshi topped $150 billion.