Former U.S. Senator Blanche Lincoln, once chair of the Senate Agriculture Committee and a key figure in crafting the Dodd-Frank Wall Street Reform and Consumer Protection Act regulating swaps, is warning that the regulatory framework she helped establish faces a threat from states attempting to block prediction markets.
“We Should Not Open Up Our Regulatory Structure to a Chaotic System”
Last week, Lincoln submitted testimony to the Commodity Futures Trading Commission (CFTC) concerning its stalled Prediction Markets Roundtable, originally scheduled for April 30 but postponed indefinitely. In her statement, she referenced her experience as a primary author of Dodd-Frank and emphasized her role in creating a “special rule” for assessing event contracts and swaps on sensitive topics like terrorism, assassination, war, and gambling, language still present in the Commodity Exchange Act.
Lincoln stated, “As lawmakers, we realized we had to establish a robust regulatory framework that would restore confidence in derivatives markets that had been deeply diminished by the collapse of Wall Street and the Great Recession in 2008.”
She highlighted that the framework’s key principles include uniform rule application and that only the U.S. CFTC should decide which futures contracts to prohibit. Lincoln expressed serious concern that the system is under threat due to states’ recent efforts to block prediction markets, federally regulated futures contracts used by traders to predict the outcomes of major events.
“We should not open up our regulatory structure to a chaotic system where states and other jurisdictions reject contracts at will,” she argued.
Lincoln’s letter follows actions by five states, including Nevada, New Jersey, and Maryland, which have issued cease-and-desist orders against Kalshi, a prediction market platform for sports and other events. Lincoln now lobbies for Kalshi through her firm, Lincoln Policy Group.
Eye-Raising Testimony
Her testimony also drew attention when she stated, “Under Dodd-Frank, lawmakers gave the CFTC authority to prohibit contracts, but only if it determines that the contracts have no commercial utility.”
She added, “A hallmark of the U.S. futures industry is that the markets determine what contracts have value and those that do not.”
However, the law’s text does not directly support her claim. The statute allows the CFTC to block contracts deemed contrary to the public interest, even if they might serve some commercial use.
Critics of sports-related event contracts have cited Lincoln’s 2010 remarks, where she argued such contracts “would not serve any real commercial purpose” and “would be used solely for gambling” on the Senate floor. Lincoln has since shifted her stance. In her testimony, she cited events like the Super Bowl as having “strong commercial value” due to their significant impact on advertising, apparel sales, and the hospitality industry overall.
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- Source: SCCGManagement.com