Prediction Market Regulators Pressed to Clarify Settlement Tests

On July 27th, the Hyperliquid Policy Center and Multicoin Capital submitted a joint comment to the US Commodity Futures Trading Commission (CFTC) in support of their proposed prediction market framework. The framework aims to amend Regulation 40.11 and establish a 90-day process for reviewing event contracts that may involve gaming, war, terrorism, assassination, or other activities listed in the Commodity Exchange Act.

The group called the plan a 'clear and well-reasoned framework' and argued that prediction markets belong under the CFTC's exclusive federal jurisdiction. They also stated that regulating prediction markets on a state level would fragment national derivatives markets.

One of their main concerns is related to the use of the word 'involve' in the Commodity Exchange Act, which could lead to trading itself being treated as gaming instead of focusing on settlement. They suggested an interpretation focused on settlement, where regulators examine the event that determines the payout and a contract would fall within the special rule when settlement directly turns on illegal activity.

The group also requested more examples in the proposal to help exchanges and developers assess regulatory exposure before launching new products. Additionally, they asked for the CFTC to publish its reasoning after every contract review, including both approvals and rejections, to create a transparent process.