Venture capital firm Andreessen Horowitz submitted an 18-page comment letter to the Commodity Futures Trading Commission on Friday, supporting federal oversight of prediction markets and opposing state-level regulatory actions. According to the letter, actions taken by state regulators against prediction market platforms—including cease-and-desist letters and proposed bans—are creating a “serious barrier to impartial access” for users.
Federal-State Regulatory Conflict
The CFTC has filed a series of lawsuits against Illinois, Arizona, Connecticut, New York, and Wisconsin, arguing that these states are acting outside their jurisdiction by attempting to regulate markets that fall under federal oversight. State regulators and attorneys general have pushed back, characterizing platforms like Kalshi and Polymarket as offering unlicensed gambling products.
A16z’s Market Access Arguments
A16z argued that requiring exchanges to block U.S. users based on their state of residence conflicts with the CFTC’s rules on fair access to markets. “Being forced to deny impartial access to users in states that seek to license or prohibit certain event contracts will likely severely circumscribe available liquidity,” the firm wrote in the comment letter.
CFTC Jurisdiction Claims
CFTC Chairman Mike Selig has asserted that prediction markets’ event contracts qualify as swaps, placing them under the CFTC’s “exclusive jurisdiction.” This assertion forms the legal basis for the federal agency’s position that state-level regulation is preempted.
Utility and Transparency Arguments
A16z also outlined the utility of prediction markets, arguing that their pricing systems act as a “unique form of price discovery” that helps “reveal probabilities for uncertain events.” The firm further argued that blockchain-based prediction markets are more transparent than traditional platforms, stating that the “auditability of onchain transactions” makes it easier for participants and regulators to monitor activity.
Market Volume Context
In April, the leading prediction markets Polymarket and Kalshi saw their cumulative lifetime volumes cross $150 billion, following months of surging use.
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