Coinbase asks the CFTC to review the definition of the gaming market

Coinbase is responding to the proposal published by the US CFTC in which it seeks to establish a regulatory framework for the gaming market, particularly the predictions sector.

According to the cryptocurrency exchange, it is an improper definition that hides the potential of a valuable cryptographic investment market.

In addition to the classic sports game events, on this type of platform, you can also bet on events of a political nature, pop culture, business, and science.

Let’s see all the details below

The proposal of the CFTC for the regulation of prediction markets

In May, the CFTC published a proposal, today harshly criticized by Coinbase, in which it defined the world of prediction markets fueled by cryptocurrencies as a “game”.

The control commission was attempting to regulate the section by specifying the types of contracts that fall under the application of the Commodity Exchange ACT.

Given the variety of new types of contracts that can be found in these events, the entity has decided to review which of these might be contrary to the public interest.

According to what has emerged, only contracts related to war events, terrorism, assassination, or illicit gambling activities have been targeted by the CFTC proposal. This means that (if the law passes) these categories cannot be traded in prediction markets, precisely because they violate section 5c of the CEA.

It seems, however, that the majority of the Chambers of the United States appears to be inclined to vote against this restriction, according to what was reported by Tarek Mansour.

The market is experiencing a significant shift, with many investors adopting a “bull” stance while others remain cautious, anticipating a “bear” trend.

What, however, made the Coinbase executives furious was the label of “game” attributed to the prediction markets.

The proposal of the CFTC indeed referred to a real sector of betting where speculation is made on the results of a match or a sports competition.

Furthermore, the commission would have drawn up a list of game examples that, violating the rules imposed by the ACT exchange, could not be published and marketed.

In publication, this proposal has obtained the support of 3 democratic officials, but now it must obtain the majority to be able to move to the application phase.

Coinbase responds to the CFTC and criticizes the definition of the gaming market

Coinbase sent today a letter to the CFTC opposing the broad definition of “gioco” that unfairly limits event contracts in prediction markets.

The exchange complained in particular about the way the Commission identifies speculation with games but fails to distinguish between market speculation and actual gambling in its proposal.

Furthermore, it argues that categorically banning an investment activity of this kind goes against the interests of the same Governo of the United States.

Considering only the rules of the Exchange Act, neglecting the significant advantages brought by these markets, one risks limiting the potential of the sector.

In fact, Coinbase states that prediction markets can efficiently aggregate information and outperform traditional forecasting methods.

The società crittografica proposes that the CFTC withdraw the broad and categorical ban on contratti di eventi and continue to evaluate them on a contract-by-contract basis. 

The whole considering the merit of public interest of each prediction market category. As reported by Coinbase in the letter:

“If adopted, the rule would capture contracts like” gioco “that, in reality, are not games,” wrote Coinbase, arguing that this is inconsistent with “legislative history related to games, none of which suggests that games should extend beyond sporting events”.

The norms advanced by the Commission should be withdrawn as they exceed the authority of the CFTC. Furthermore, they ignore the positive impact of prediction markets on the US economy.

Paul Grewal, Chief Legal Officer di Coinbase, ha preso fortemente posizione per attaccare il malsano operato dell’ente federale. La sua visione è che la CFTC stia fortemente limitando technological and financial innovation del Paese.

“We firmly believe that this all-or-nothing approach to the treatment of event contracts is not consistent with the promotion of responsible innovation and growth in regulated, transparent markets with adequate safeguards to protect market integrity and protect customers.”

A “game” worth 1 billion dollars

The attribution of the term “game” by the CFTC for prediction markets, and the subsequent response from Coinbase, refer almost exclusively to the Polymarket platform. It indeed represents the most used crypto exchange to manage bets on future events, with various categories within it.

Among these, the Federal Commission is concerned about those related to geopolitical outcomes with events such as “Will Iran launch a military action against Israel within the next week?”.

According to the CFTC, freely trading events of this type can create tensions and fuel the manipulation of collective thinking, going against the interests of the country.

In any case, it is clear that the definition of “game”, although the platform may take on a gambling connotation for some users, is not appropriate.

Polymarket in the month of July alone recorded a total volume of over 1 billion dollars. Not only that, on August 6th it set the record for daily volume at 29 million dollars.

From January onwards, it has been one of the reference markets for the presidential election campaigns in the United States, attracting many predictions.

All this without even considering the other prediction market in the crypto sector such as Hedgehog, Augur, Projection Finance, Better Fan, Feel, SanR.app etc.

 Do you still think it’s a game?