- CFTC, SEC already share some oversight obligations
- SEC Chair Atkins says prediction markets have potential overlap for the 2 businesses
- It’s unlikely the SEC would get entangled with sports activities occasion contracts
Prediction market operators could quickly have one other federal regulator to reply to: The Securities and Alternate Fee (SEC).
The Securities and Alternate Fee (SEC) brand. The company may tackle some oversight of prediction markets. (Picture: SEC)
At a Senate Banking Committee listening to Thursday, SEC Chairman Paul Atkins acknowledged the majority of the regulatory duty for prediction markets falls to the Commodity Futures Buying and selling Fee (CFTC), however there are components of the business that might be regulated by the SEC or by each businesses.
Prediction markets are precisely one factor the place there’s overlapping jurisdiction probably,” stated Atkins on the listening to. “That could be a big difficulty we’re targeted on.”
He added that the CFTC and SEC must be “harmonized” in how they handle the quickly rising prediction markets business.
Sports activities Unlikely Prediction Markets Frontier for SEC
Sports activities occasion contracts — the first engines of prediction markets quantity — are an unlikely frontier for SEC oversight. These derivatives are licensed by means of the CFTC and when sure/no trade operators undergo the self-certification course of, that happens by means of filings with the CFTC.
Maybe cementing the notion that the SEC gained’t be concerned in overseeing sports activities occasion contracts is the truth that new CFTC Chair Michael Selig is pledging to rewrite guidelines governing sports activities derivatives — devices some critics say are sports activities playing beneath a unique label.
“Chairman Selig directed CFTC workers to withdraw beforehand proposed guidelines and workers advisories that will have had a chilling impact or contributed to uncertainty about participation in prediction markets,” notes Alvarez & Marsal. “The CFTC plans to draft new guidelines that can present clearer parameters for prediction markets and can develop a joint interpretation of Title VII definitions with the SEC to make clear swap product classifications and jurisdiction.”
The place SEC May Have Prediction Markets Oversight
Whereas the intersection of prediction markets and sports activities is what generates headlines, these exchanges provide contracts on rather more than sports activities. These choices embrace derivatives on company occasions such earnings updates, mergers and acquisitions, and product bulletins — all of which may have an effect on inventory costs and thus fall beneath the purview of the SEC.
Prediction markets additionally characteristic occasion contracts tied to actions on main fairness indexes, such because the S&P 500, some particular person inventory costs, and goings on within the Treasury market. The SEC would probably be the regulator for these derivatives.
“A safety is a safety regardless how it’s and a number of the nuance with prediction markets and the merchandise relies on wording,” stated Atkins on the Senate listening to.
For institutional buyers, danger managers, and policymakers, extra regulatory readability might be encouraging because it may pave the best way for expanded utilization of prediction markets by skilled buyers. Many on Wall Road wish to see that occur as a result of there’s budding sentiment that if all prediction markets change into is an alternative choice to sports activities betting, that will be disappointing.
