Robinhood and Gemini Back Coinbase’s Push Against CFTC’s Political Betting Ban Proposal

• The CFTC is looking to ban certain prediction markets, especially political ones.
• Coinbase has argued that the proposal’s wording would have unintended consequences.
• Other crypto leaders joined Coinbase, protesting in particular against Senator Elizabeth Warren.

A proposal  from the US Commodities Futures Trading Commission’s (CFTC’s) proposal is looking to effectively ban prediction markets, and Coinbase, Gemini, and other crypto industry leads are biting back.

In the latest Crypto vs. the US government round, Coinbase argues that event markets are a “promising area” of the nation’s future economy.

Robinhood And Gemini Back Coinbase

Following Coinbase’s lead, companies such as Gemini, Crypto.com, and Robinhood  are taking a stand against the CFTC’s proposed regulation on banning event contracts.

In detailed letters to the CFTC, Robinhood, Dragonfly Capital, and Scott Alexander raised concerns about the CFTC’s authority to implement such a ban, citing that it could harm the industry. Crypto.com’s Steve Humenik  also emphasized the importance of the CFTC adhering to its legal limits.

Gemini founder Cameron Winklevoss called on the CFTC to collaborate with the industry rather than impose restrictive measures. Winklevoss emphasized :

“The decision on this Proposed Rule is critical and carries significant economic consequences. The CFTC must not yield to the pressure Senator Warren has exerted to push this rule forward. Her arguments are unintelligible, politically motivated, and do not serve the best interests of the American people.”

Winklevoss further criticized Senator Warren and SEC Chair Gary Gensler’s influence over regulatory agencies. He asserted that they have undermined the SEC’s integrity and irreparably damaged its reputation.

He called on CFTC Chairman Rostin Behnam and the Commission to act independently, distancing themselves from what he described as “toxic, odious characters,” and to prioritize the welfare of the American people.

Winklevoss also predicted that the courts would likely overturn the CFTC’s proposal if it were adopted, citing the recent Supreme Court ruling in Loper Bright Enterprises v. Raimondo, which limits the ability of regulatory agencies to expand their power through rulemaking.

CFTC Commissioner Summer Mersinger highlighted in her dissent that the proposed rules “exceeds the legal authority that Congress granted the Commission.”

Rather than proceeding with a rule that could restrict Americans’ access to these valuable markets, Winklevoss urged the CFTC to withdraw the proposal and invite it to collaborate with industry stakeholders to develop a more balanced approach. “This would be a trust-building move. Onward!” he concluded.

Event Contract Ban

In May, the CFTC proposed banning  certain event contracts within the burgeoning prediction market economy, particularly betting on outcomes of political contests, athletic events, etc.

However, Coinbase has taken the regulator to task over its wording , particularly the use of “gaming” in this context.

In his response, Coinbase Chief Legal Officer (CFO) Paul Grewal wrote  that the proposal would essentially restrict event contracts. It’d make this by regulating them with such a broad definition rather than their merits.

Without properly determining what “gaming” is, Coinbase argues that this “oversteps the Commission’s statutory authority” and is “economically unsound.”

With Good Reason?

The CFTC’s proposal suggests that political bets can result in unintended consequences, such as changing how people vote, promoting insider trading, collusion, and other negative outcomes such as war, terrorism, and even assassination.

“Allowing billionaires to wager extraordinary bets while simultaneously contributing to a specific candidate or party, and political insiders to bet on elections using non-public information, will further degrade public trust in the electoral process.”

The regulator’s proposal also follows the explosive growth of event markets and crypto prediction platforms such as Polymarket. The latter recently surpassed betting volumes of $1 billion, particularly fueled by the US presidential race.

At press time, users had bet over $560 million  on the winner of the November election.

Coinbase Responds

As per Coinbase, the Commission’s proposal is a departure from its long-standing practice of having the Council of Economic Advisers (CEA) review it.

Grewal asserted that the new proposal would harm innovation in event contract markets. He stated that the application of broad categorical determination in this field is flawed, particularly in terms of the definition of “gaming.”

“Nowhere does the legislative history suggest that gaming includes elections, awards, or even contests more generally outside of sporting events.” Grewal wrote.

In his closing comments , Grewal urged the CFTC to withdraw the proposal. And begin working with “academic, industry, and policy stakeholders.” In doing so, there’ll be a clear and balanced approach that fosters innovation and protects public interest.

About the Author

Eddie Mitchell

Eddie has been writing news and content primarily for crypto news and industry players over the past seven years. With an eye for the bigger picture, Eddie prefers to investigate the broader implications of a story, as well as explore the weird and wonderful world of crypto. He believes blockchain has already changed the world, but observes the space overall with a skeptical and adoring eye.

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