Coinbase raised concerns about the U.S. Commodity Futures Trading Commission’s (CFTC) proposed rule to ban certain event contracts, arguing that the move could stifle innovation without sufficient justification.
In a post on X, Coinbase Chief Legal Officer Paul Grewal said he supports the CFTC’s mission to maintain the integrity of the U.S. derivatives market. However, he warned that the proposed rule could ban a wide range of prediction contracts, such as those involving Nobel Prizes or the Oscars, without clear reasoning.
Grewal noted that the broad definition of “gaming” in the proposal could have unintended negative effects on emerging markets regulated by the CFTC.
The CFTC’s proposal was introduced in May and seeks to ban event contracts related to political contests, gaming, war, terrorism, and other sensitive areas. This follows pressure from lawmakers, including crypto-skeptic Sen. Elizabeth Warren, who argue that allowing bets on elections could undermine public trust in the democratic process.
Coinbase and other crypto firms donated to the Commonwealth Unity Fund, a new super political action committee (PAC) established by attorney James Murphy. The donation seeks to unseat anti-crypto Senator Elizabeth Warren and support pro-crypto lawyer John Deaton.
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In a detailed letter to the CFTC, Coinbase urged the agency to withdraw the proposal and collaborate with academics, industry leaders, and policymakers to develop a more balanced approach. Grewal criticized the proposal’s approach to evaluating contracts as exceeding the CFTC’s statutory authority and failing to recognize the public benefits of prediction markets.
The debate comes as event markets like Kalshi and Polymarket gain popularity, allowing users to bet on outcomes of future events, including U.S. elections. However, CFTC Chair Rostin Behnam voiced concerns that allowing such contracts could push the agency beyond its Congressional mandate.
The news also comes amidst Coinbase’s ongoing legal battle with the U.S. Securities and Exchange Commission (SEC), which also questions whether tokens sold on the exchange should be considered securities. It alleges that the largest U.S. cryptocurrency exchange has violated securities laws by facilitating the trading of at least 13 crypto tokens that should have been registered as securities.
