Will Congress fix crypto regulations before it's too late? Behnum said the lack of legal clarity leaves the CFTC “handcuffed” as the cryptocurrency market continues to evolve.
CFTC is 'handcuffed'
The increasing complexity of the crypto market isn’t the only thing that U.S. Commodity Futures Trading Commission Chairman Rostin Behnam is concerned about.
Behnum, who has long advocated for clearer rules in the digital asset space, is now calling on Congress to address two key issues: crypto regulation and election gambling.
In recent remarks at a major industry conference, Behnam said the lack of a clearer legal framework leaves regulators like the CFTC “handcuffed” as technological disruption accelerates. I felt angry when I saw it.
Without action from Congress, risks to both investors and the health of U.S. markets will continue to rise. But as an election year approaches and political obstacles mount, can lawmakers act in time to bridge these gaps, or will they remain in the dark?
Unfinished business of cryptocurrency regulation
Behnum’s call to action on cryptocurrencies is not new, but the risks have never been higher. With the rapid rise of digital assets, from Bitcoin (BTC) to decentralized finance, regulatory frameworks are also struggling to keep up.
Some bills, such as the Financial Innovation and Technology for the 21st Century Act, aim to provide some clarity, but remain stuck in legislative limbo.
FIT 21, passed by the House of Representatives earlier this year, would give the CFTC more authority over “digital goods” like Bitcoin. However, no progress has yet been made in the Senate.
For example, FIT 21 proposes a clearer test for determining whether a digital asset is a commodity or a security, but it also raises new questions. How should regulators define decentralization?
More importantly, who decides which assets are sufficiently diversified to be classified as commodities and which are subject to securities laws?
Add to that the pressing dilemma of overreach by the U.S. Securities and Exchange Commission and its current chairman, Gary Gensler. Gary Gensler is known as a cryptocurrency critic, and his policies and operations are considered by many to have done more harm than good. good.
Therefore, without a clearly defined legal framework, the CFTC finds itself in the difficult position of being able to enforce some rules but not fully protecting investors.
Behnam argues that this regulatory gap exposes the market to bad actors and prevents institutional investors from entering the space with confidence.
Behnum doesn't expect Congress to take meaningful action this year, citing the holidays and the urgency of passing a federal budget.
“If we look to 2025, we'll have a new Congress and potentially a new president, and I think it's likely that some legislation will be enacted,” he said.
The growing turmoil over election gambling
While the crypto market faces regulatory ambiguity, the rise of election gambling platforms like Calci and Polymarket has drawn the CFTC into an unexpected legal battle.
Karsi, a prediction market that allows users to bet on election outcomes, clashed with the CFTC when it deemed election contracts illegal, saying they could undermine public trust in the democratic process.
This isn't the first time the CFTC has cracked down on these platforms. Polymarket, another prediction market built on the Polygon (POL) blockchain, was fined $1.4 million in 2022 for operating without proper regulatory compliance and was banned from operating for US residents. had no choice but to stop.
The debate intensified after Kalsi filed suit against the CFTC in 2023, resulting in a court ruling in favor of the platform in September 2024. The judge found that the CFTC exceeded its statutory authority by blocking Mr. Carsi's election contract.
The agency quickly appealed the decision, but Mr. Carsi resumed betting on the 2024 U.S. presidential election. This is causing alarm not only from regulators but also from prominent voices in the industry.
Billionaire investor Mark Cuban, who has been a vocal critic of these platforms, has raised concerns that the gambling market could be distorted by foreign influence and market manipulation. “These odds are not indicative of anything meaningful,” Cuban said.
Meanwhile, figures like tech billionaire Peter Thiel financially support polymarkets, seeing them as tools to exploit market sentiment.
Billions of dollars flow into these platforms during the election period, and a delay in Congress could make it difficult to control prediction markets and protect the integrity of U.S. elections.
Gambling market thrives despite legal scrutiny and criticism
As the US election cycle races toward a conclusion in just two weeks, prediction markets like Calci and Polymarket are seeing unprecedented activity despite ongoing legal battles and intense criticism.
Kalsi, which launched an election prediction contract in October after winning a lawsuit against the CFTC, has gained some traction.
The platform has raised more than $47 million in trading volume for major U.S. election contracts as of Oct. 22, a strong start for a platform that has been in and out of court.
However, Karshi's trading volume still lags behind its larger and more established competitor Polymarket, which had more than $2.16 billion in total trading volume.
Polymarket is driven by global participation, as the platform operates without the need for U.S. traders or customer understanding processes, and in just the first month of presidential gambling from January to February 2024. It recorded a $40 million deal.
This difference between the two platforms highlights the differences in their approaches. While Calsi restricts trading to U.S. citizens and permanent residents due to regulatory compliance, Polymarket operates in the gray area of offshore markets and attracts a broader, global user base.
Interestingly, both platforms show similar trends in predicting election results. The polymarket currently gives Donald Trump a 64% chance of winning, followed by Kamala Harris at 36%.
Mr. Kalsi shows a similar trend, but with a slightly different difference. Trump leads with 59%, followed by Harris with 41%. Despite differences in platform operations, betting sentiment appears to be consistent across the board.
Karshi is a regulated platform, which reduces the risk of market manipulation accusations often leveled at polymarkets.
Critics of Polymarket argue that its lack of KYC requirements opens the door for foreign interference and dark money to push the odds in a certain direction.
Despite all the criticism and noise, both platforms are thriving, each offering a unique snapshot of how people perceive the election results.
As elections approach, these platforms are likely to remain at the center of discussions about market activity and regulation, proving that even surveillance markets and prediction markets are not only alive but thriving. There is.
