Kristin N. Johnson, who is stepping down from her role as a commissioner at the Commodity Futures Trading Commission (CFTC), used her final public appearance to raise concerns about the risks retail users face when participating in prediction markets.
During a speech at the Brookings Institution on September 3, Johnson pointed out that some companies are offering contracts linked to real-world events, such as elections or sports games, with added leverage, and are targeting people who may not fully understand the risks.
She warned, “As of today, we have too few guardrails and too little visibility into the prediction market landscape”.
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A key issue for Johnson was the CFTC’s lack of action on event-based contracts. She said the agency still has not implemented a rule to explain how such contracts should be handled, which has allowed them to grow without proper supervision.
She also said firms sometimes apply for licenses under the impression that they will stick to traditional products. However, after they are approved, they offer prediction contracts instead. In some cases, companies even sell or rent out these licenses to others.
Johnson stressed that newer firms, especially those in the crypto and prediction markets, often lack strong systems in place to manage risk or comply with regulations.
Rather than holding back innovation, she said regulators should focus on building clear expectations early on. She noted:
If we fail to rightly prioritize consumer protection or market stability on the road to capturing the benefits of innovation or growth, the results can be devastating.
On August 28, the CFTC announced new rules that may permit international crypto exchanges to legally serve US customers. What do these rules cover? Read the full story.
