a16z strongly supports the CFTC's regulation of "prediction markets"! He criticizes state bans for undermining fair access and reducing market liquidity.

The explosive growth of prediction markets is sparking a fierce jurisdictional battle between federal and state regulators in the United States. This time, top venture capital firm a16z (Andreessen Horowitz) has chosen to stand firmly on the side of federal regulators.

On Friday (1st), a16z submitted an 18-page comment letter to the U.S. Commodity Futures Trading Commission (CFTC), expressing support for the CFTC's regulatory leadership and strongly opposing the recent crackdown on prediction markets by various state governments.

State bans undermine "fair access" and severely stifle liquidity.

Recently, regulatory agencies and attorneys general in several U.S. states have targeted prediction market platforms such as Polymarket and Kalshi, accusing them of providing "unlicensed gambling products" and issuing orders to cease operations and proposed injunctions.

In response, a16z criticized these state-level enforcement actions, pointing out that they are creating a "serious barrier to fair access" for users. a16z emphasized that if trading platforms are forced to implement regional blocking based on users' state of residence, this would seriously conflict with the CFTC's principles regarding fair market access. a16z warned in the letter:

"Being forced to deny fair access to state users who seek licenses or bans on certain event contracts will likely severely limit the liquidity available in the market."

Federal and state-level legal battles: a derivative or a gamble?

In fact, the CFTC has taken extremely rare legal action to defend its jurisdiction. In the past month alone, the CFTC has filed a series of lawsuits against Illinois, Arizona, Connecticut, New York, and Wisconsin, accusing these state governments of "overstepping their authority" by attempting to regulate markets overseen by the federal government.

CFTC Chairman Mike Selig also explicitly argued that event contracts in the prediction market are legally defined as "swaps" and therefore should fall entirely under the CFTC's "exclusive jurisdiction" .

Predicting market trading volume to exceed 150 billion magnesium, possessing unique price discovery value.

Beyond discussing legal jurisdiction, a16z also strongly defends the core value provided by prediction markets themselves. The organization points out that prediction market pricing systems act as a "unique form of price discovery," effectively helping society reveal the probability of various uncertain events.

Regarding decentralized prediction markets, a16z emphasizes the advantages brought by blockchain technology. They believe that blockchain-based prediction markets are far more transparent than traditional platforms because the "auditability of on-chain transactions" allows market participants and regulators to more easily conduct real-time monitoring.

Market data also confirms the enormous demand for this innovation. After months of explosive growth in usage, in April of this year, the total cumulative trading volume of the two leading prediction markets, Polymarket and Kalshi, officially surpassed the $150 billion mark. With the strong support of Wall Street giants such as a16z, this regulatory battle concerning the legality and future of prediction markets is bound to enter a more intense phase.

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