A16z Backs CFTC in Prediction Market Jurisdiction Fight

Andreessen Horowitz filed a letter with the Commodity Futures Trading Commission on Thursday backing the agency in a dispute over prediction markets. The venture firm argued state actions, including cease-and-desist orders and criminal referrals, are creating barriers that undermine the CFTC’s mandate to provide impartial access to its markets and services.

The letter responds to the CFTC’s advance notice of proposed rulemaking on prediction markets and defends the agency’s effort to assert jurisdiction over platforms that list contracts on political events, sports outcomes and other real-world events. In recent weeks the commission has sued Illinois, Arizona, Connecticut, New York and Wisconsin, arguing those states overstepped by trying to regulate markets the agency views as falling under federal commodities law.

A16z warned that forcing exchanges to block users based on state residence would conflict with the CFTC’s impartial access rules and would reduce liquidity on platforms. The letter added: ‘Being forced to deny impartial access to users in states that seek to license or prohibit certain event contracts will likely severely circumscribe available liquidity.’ The submission argued reduced liquidity would weaken the markets’ ability to produce reliable prices.

State attorneys general have accused some platforms of operating unlicensed gambling services by offering contracts tied to sports and political outcomes. A16z countered that the CFTC, which has regulated event contracts for decades, is the proper authority to define what counts as ‘gaming’ under federal commodities law.

Beyond jurisdictional points, the letter described prediction markets as a form of price discovery that aggregates diverse information and opinions. The letter endorsed blockchain-based markets, saying onchain records provide transparent, auditable transaction histories that can aid regulators.

Trading in the sector has grown: monthly volume reached about $25.7 billion in March. More than 80% of users are classified as retail traders who typically trade under $10,000.

Some platforms face enforcement actions. Polymarket agreed in 2022 to pay a $1.4 million penalty and to block U.S. customers after offering unregistered event contracts. The company is in discussions with the CFTC about restoring U.S. access; a full return would require a formal commission vote. The process may be affected by current vacancies in four of the agency’s commissioner seats.

A16z’s letter provides major investor support for the CFTC position while federal and state officials press competing legal claims.