FIA’s Lukken calls for ‘solid regulatory framework’ around prediction markets

Speaking as he opened the FIA Expo event in Chicago on Monday, Walt Lukken pointed to the growing number of contracts coming to market, and the ability of the US Commodity Futures Trading Commission (CFTC) to review the new instruments.

“We … need a frank discussion on the risk profile of these contracts and the customer protections afforded to consumers,” Lukken (pictured) said in opening remarks. “Even the CFTC itself is struggling to keep pace with the hundreds of contracts being submitted monthly for their review.

“These are not unsolvable questions, but we need to roll up our sleeves, with market participants and policymakers alike, to find the answers. These markets are innovative and here to stay, and it is imperative we build a solid regulatory framework that allows for their safe growth.”

A series of traditionally regulated exchanges are preparing to expand their presence in the segment.

CME Group last week confirmed it will list sports contracts, in addition to global benchmarks and economic indicators, to the event contracts platform it is launching in partnership with FanDuel in December.

Intercontinental Exchange (ICE) last month sealed a $2 billion (£1.5bn) investment in prediction market Polymarket, as part of a data partnership.

Cboe Global Markets in October said it was “crafting a go-to-market plan” for its own event contract offering.

“These markets have caught a wave of excitement from a new generation of traders and gamers,” Lukken added. “Even Wall Street trading desks are using event contracts for market indicators on inflation, the economy, and government actions.

“But, as these markets move away from pure economic events to speculative activity and sporting events, policymakers and market participants are seeking legal clarity around what is permissible.”