CFTC Eases Rules on Prediction Markets in Apps
The US Commodity Futures Trading Commission (CFTC) has made it easier for apps to offer prediction markets without registering as brokers. The move expands a model already used by Phantom, which offers prediction markets powered by Kalshi to its over 20 million users.
According to the CFTC's no-action letter, qualifying 'passive software' providers can offer access to regulated derivatives, including prediction markets, while receiving a share of trading revenue or charging users transaction-based fees. However, these providers cannot hold customer assets, generate buy or sell signals, or control how trades are executed.
The relief is temporary and lasts until the CFTC issues a rule or other guidance on broker registration for software developers. This means that more apps could start offering prediction markets in the future.
Robinhood's success with event contracts highlights the potential of this market. In the second quarter, Robinhood generated $156 million from event contracts, surpassing its $129 million from equities or $100 million from cryptocurrency trading.