Americans taking to the markets to express their views on major events is nothing new. For decades before political polling existed, Americans were able to trade openly on organized markets for presidential races in the United States, and they enjoyed prices that were widely regarded as the most accurate election forecasts of their day. That track record reflects an insight that economist Friedrich Hayek made famous: the knowledge that matters most is dispersed across millions of people, and prices are the mechanism that gathers it into a single, usable signal. 

Today’s prediction markets, where people buy and sell contracts that pay out based on real-world outcomes, have reached serious scale: trading volume across the major venues topped $50 billion in June, many times the level of a year earlier. These markets allow Americans to trade on everything from Federal Reserve rate decisions to election outcomes, and the financial industry has noticed: major exchanges and Wall Street trading firms are moving into the space.

The CFTC is now writing the rulebook these markets have earned. Earlier this year, the Commission issued an advance notice asking the public dozens of questions about how prediction markets should be regulated. The Commission’s proposed framework (the “Proposal”) answers one of the most consequential: when should contract be kept off a regulated exchange? Under the statute, the Commission can review an event contract that "involves" certain listed activities, such as war or gaming, and can block the contract from trading if the Commission finds it contrary to the public interest. The Proposal sets out how the Commission will use that authority.

The Commission is answering this question at exactly the right moment. Some states are seeking to regulate these markets under their own gambling laws, and are challenging them in court, wielding the Commission's existing review framework as a cudgel in ways the statute does not support. 

Today, HPC and Multicoin Capital filed a joint comment in support of the Proposal. Our letter makes three main points.

Clear rules beat guesswork. Written standards that do not change with each new administration give builders the confidence to invest in these markets, and the Proposal writes those standards directly into rule text. 

Prediction markets should answer to one federal regulator. Some states challenging these markets argue that event contracts are simply gambling and belong under state gaming laws. But the two products are built differently. A bet with a bookmaker is a wager against the house: the house sets the odds and wins when you lose. An exchange-traded contract is a trade between two willing participants at a market price, and the venue's business is matching that trade for a fee, whichever side wins. Congress saw that structural difference in 2010 and put the authority to regulate these markets, and where necessary to review controversial contracts, with the CFTC alone. Forcing a national market to comply with fifty state gambling regimes would fragment exactly what Congress meant to unify.

The CFTC should consider two refinements that would make a strong rule even more targeted and promote transparency:

Adopt the settlement-based reading of "involve" and provide additional examples. The rule turns on one word: the Commission can block a contract as contrary to the public interest only if it "involves" one of the activities the statute lists. The Proposal reads that word the sensible way, by looking at what a contract actually pays out on, so a passing connection to a contract's subject does not count. A federal court in Washington, D.C. read the statute the same way, and writing that reading into rule text makes it hold across administrations. Edge cases will remain, and we encourage the Commission to publish examples showing where the lines sit, so builders can design products against known rules instead of guesses.

Publish the reasoning every time a review ends. Under the Proposal, the Commission explains a decision to block a contract but not a decision to allow one. A decision to allow tells the market just as much about where the lines are, and the analysis is already done by the time a review concludes. Everyone benefits when that reasoning is public, because each published decision becomes guidance the whole market can build on.

Hyperliquid already supports outcome-based contracts, the building blocks for onchain prediction markets. Those markets launched in May and are growing quickly: open interest recently hit an all-time high, with every position fully collateralized and settled onchain. Clear, technology-neutral federal rules will let markets like these grow responsibly under a uniform, national framework instead of inside a state-by-state patchwork. The principles at stake in this rulemaking (standards written in advance and reasoning published for everyone, under one federal rulebook) are the same principles we advocate across onchain derivatives, including perpetual futures.

Our full comment letter is available here.