Comment on CFTC-2026-0331, CFTC-2026-0331-0001, James, Smith

Comment on Advance Notice of Proposed Rulemaking Prediction Markets (RIN 3038-AF65) The CFTC should exercise its authority under CEA section 5c(c)(5)(C) to prohibit or significantly restrict many event contracts on prediction markets like Kalshi. What these platforms are offering is not sophisticated price discovery or risk management it is thinly disguised sports gambling that circumvents state gaming laws and consumer protections. Roughly 90% of Kalshi s trading volume comes from sports events, including game outcomes, spreads, player props, and parlays. These contracts function identically to bets available on DraftKings or FanDuel, yet the platform uses CFTC registration to claim federal preemption and operate nationwide, even in states that strictly regulate or prohibit sports betting. This undermines state sovereignty, evades gaming taxes and licensing requirements, and creates an uneven playing field for legitimate, state-regulated operators. These markets are inherently predatory. They target younger users with rapid-fire, high-frequency event contracts on everything from college sports to daily player performances, encouraging addictive behavior with easy mobile access and leveraged-style exposure. The resolution of many contracts is subjective or prone to disputes, placing far too much responsibility on the platforms themselves to self-police manipulation, inside information, and fair outcomes responsibility they have repeatedly shown they cannot or will not handle adequately. Prediction markets dressed as event contracts pose clear risks to market integrity, retail customers, and the public interest. The Commission must impose much stronger oversight, including meaningful position limits, enhanced surveillance, stricter listing standards, and robust consumer protections. Where contracts are essentially gaming activity, they should be deemed contrary to the public interest and barred from trading on CFTC-registered entities. Responsible innovation does not mean handing lightly regulated platforms a license to run a nationwide sportsbook under the guise of derivatives. It is time for the CFTC to rein this in before more users suffer unnecessary financial and emotional harm.