Astral Codex Ten

Commodity Futures Trading Commission

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Commodity Futures Trading Commission

Article

Commodity Futures Trading Commission is a recurring organization in the Astral Codex Ten archive, appearing 7 times across 7 issues between November 01, 2021 and May 13, 2024. The archive places it in contexts such as “The Commodity Futures Trading Commission, the relevant regulatory watchdog”; “Polymarket got fined $1.4 million by the Commodity Futures Trading Commission”; “Commodity Futures Trading Commission, the agency that regulates some markets in the US”. It most often appears alongside Metaculus, Polymarket, CFTC.

Metadata

  • Category: Organizations
  • Mention count: 7
  • Issue count: 7
  • First seen: November 01, 2021
  • Last seen: May 13, 2024

Appears In

Source Context

Recovered passages from the original issue text. When the raw archive preserved outbound links inside the source passage, they are listed directly under the quote.

21
November 01, 2021 · Original source
— In the US, real-money prediction markets are still illegal, unless they’ve undergone the harrowing, expensive, and highly constraining process of registering as a securities exchange. The Commodity Futures Trading Commission, the relevant regulatory watchdog, is investigating Polymarket for not doing this. I hope everyone involved will be able to come to an agreeable solution instead of crushing what’s currently the leading prediction market or forcing it to become worse.
Inline links: is investigating Polymarket
The Passage Of Polymarket
February 07, 2022 · Original source
Polymarket got fined $1.4 million by the Commodity Futures Trading Commission and was ordered to cease noncompliant trading in the US.
Inline links: got fined $1.4 million by the Commodity Futures Trading Commission
The rumor on the prediction market grapevine (which I absolutely cannot substantiate; please don’t sue me for libel) is that this might have something to do with competing prediction market Kalshi. Kalshi spent two years and probably a lot of money getting the CFTC to agree they were legal, and has a former CFTC Commissioner as a Director. Their legal status forces them to do an annoying and expensive regulatory dance all the time; illegal prediction markets were able to move more nimbly, provide better user experience, and eat their lunch. This was a big problem for them - but they’d just finished making lots of friends in the agency that decides which illegal things to crack down on, so, as Tyler Cowen likes to say, “solve for the equilibrium”.
Inline links: rumor, two years, has a former CFTC Commissioner as a Director
Some might call a headquarters building with a CEO sitting in it and millions in the bank account a “center”, so in what sense was Polymarket decentralized? See here for more discussion, and here for the full text of the CFTC decision, but my understanding is - all of the markets themselves were smart contracts on the blockchain run by automated market makers, but you could only access them through the Polymarket website, and the Polymarket people decided how they resolved. Polymarket did not charge fees, and made money by providing liquidity. The CFTC seemed angriest about the “you can only access contracts through the Polymarket website” part of this. Crypto attorney Collins Belton writes:
Inline links: here, here, Collins Belton
22
August 16, 2022 · Original source
In 2014, Victoria University in New Zealand struck a deal with the Commodity Futures Trading Commission, the agency that regulates some markets in the US. CFTC would let Victoria set up a prediction market - at the time a relatively new idea - for research purposes only. Their no-action letter placed strict limits on Victoria’s project:
Inline links: Their no-action letter
On August 4, the CFTC reversed itself, saying the PredictIt had “not operated its market in compliance with the terms of the letter” and that it had to shut down by February.
Inline links: reversed itself
There was no explanation of how it might not be in compliance with the terms of the letter. PredictIt has clearly stuck to the 5,000 traders and $850 investment limits, and AFAIK no one has accused them of meddling in world events. Victoria University did hire a private company, Aristotle Inc, to run operations, which seems against the “not for profit” clause. But this happened in 2015, and the relationship between PredictIt and Aristotle hasn’t changed since then. Also, supposedly PredictIt has been “in regular communication” with the CFTC throughout its lifespan to make sure they were on the right side of the law; if CFTC was angry about something they did in 2015, why wouldn’t they have told them before now? So what’s going on?
Inline links: supposedly
22
October 18, 2022 · Original source
Sources: Manifold, CSPI, Metaculus, Polymarket, PredictIt, Insight, GJOpen The lowest forecaster is higher than the highest pollster! Taking 538 as an example, forecasters range from 5 pp higher (Manifold) to 17 pp higher (PredictIt). Tournaments and real-money markets tend to give higher numbers than play-money sites. I would go with 47% on this one, based on the convergence between GJO, CSPI, and Polymarket. CFTC vs. PredictIt (and everyone else), Part II The Commodity Futures Trading Commission is the US agency regulating prediction markets. In August, they told PredictIt (the biggest political prediction market) to shut down, effective in February. Now a motley group of stakeholders are suing the CFTC for a stay of execution. Plaintiffs include: 2 professors using the site as “a source of data for research”
Inline links: Manifold, CSPI, Metaculus, Polymarket, PredictIt, Insight, GJOpen, they told PredictIt
Several additional plaintiffs I can’t find good information about
Inline links: additional plaintiffs
Several additional plaintiffs I can’t find good information about You can find the complaint here. The plaintiffs write: The [CFTC’s action], without explanation or other indication of reasoned decisionmaking, without “written notice of the facts or conduct which may warrant” the Revocation, and without providing anyone “an opportunity to demonstrate or achieve compliance” with the terms of No-Action Relief or other requirements, violates the Administrative Procedure Act. 5 U.S.C. §§ 558, 706. Among other things, the Revocation is “arbitrary, capricious, an abuse of discretion, [and/or] otherwise not in accordance with law” and occurred “without observance of procedure required by law.” The Court should “hold unlawful and set aside” the Revocation, including its command that contracts that would otherwise turn on events occurring after February 2023 be prematurely liquidated. 5 U.S.C. § 706. The Court also should enter a preliminary and then permanent injunction against the prescriptions in the Revocation requiring the liquidation of contracts by February 2023, including contracts that concern the 2024 elections, well before they would ordinarily mature. I am not a lawyer, but it sounds kind of like they’re saying “the decision was bad, and the Administrative Procedure Act says regulators shouldn’t do bad things”. I am split between the part of me which hates government regulators doing bad things, and the part of me which feels like this is how you get a cover-your-ass-ocracy that never does anything at all without fifteen layers of paperwork and ten trillion dollars per action. Whatever. At least this time it’s in my favor. Of course there are prediction markets about it: Source: Insight Prediction Nuclear Warcasting, Part 2 Samotsvety Forecasting is a team made of top prediction market players and tournament winners, vaguely affiliated with effective altruism, who make predictions in the public interest. Earlier this year, they got attention for forecasting the risk of nuclear war - in particular, they said there was an a 0.01% per month chance of London getting nuked this spring. Since then, most of the fear has crystallized into a specific scenario. Suppose Russia is losing very badly in Ukraine. Putin, fearing a coup or revolution at home if he gives up, decides to use a tactical nuclear weapon, ie a “small” nuke more suited to winning battles than destroying cities. He nukes a Ukrainian battlefield position. The West is enraged at this violation of the nuclear taboo and feels like it needs to respond decisively - maybe by nuking something on Russia’s side, or through some other act of extreme escalation. Then Russia feels like they need to respond, and eventually it escalates to strikes on major cities and global nuclear war. There are reasons for doubt. Tactical nukes wouldn’t really be useful in Ukraine; the battle lines are too spread out and there’s no single place where a nuclear explosion could take out a substantial portion of Ukraine’s forces. In the past, nuclear powers have accepted lost wars gracefully rather than turning to nukes. And the Russians deny it, and saying this is all just Western propaganda intended to scare people. Amid this uncertainty, Samotsvety has published an update: now they are at 16% chance that “Russia uses any type of nuclear weapon in Ukraine in the next year”, and 0.02% per month of a strike on London. Although they didn’t mention it this time, they previously said the risk of a strike on San Francisco was a little over half that of London; I don’t know if that’s changed. See also Dan Keys’ comment here for some skepticism of Samotsvety’s process. Swift Centre is a lot like Samotsvety; they’re a collection of top forecasters brought together by EA to make important predictions. They also took a swing at the nuclear question, and said 9.1% chance of a hostile nuclear detonation in Europe in the next six months. They didn’t calculate the risk that this would spread to global war, but they did discuss how different scenarios would bring the risk up or down: One of my hopes for forecasting is that it eventually becomes so well-validated that decision-makers can take these kinds of considerations into account: “Should we sent ATACMS missiles to Ukraine? It would have such-and-such benefits, but also increase the risk of nuclear escalation by 3.6%, is it worth it?” We can’t directly compare Samotsvety and Swift because they’re predicting over different time periods. But assuming that there’s more risk in the next six months than in the six months after that, I think Samotsvety is a little higher but they’re not embarrassingly far off. Metaculus is a bit more optimistic than either, believing there’s only a 4% chance of detonation in Ukraine in 2023 and a 7% chance of any use in the next ~year. Max Tegmark is going much higher than anyone else and says 16% chance of global nuclear war. Kalshi Applies For Election Markets Kalshi is a regulated and fully-legal prediction market with good lobbyists and a compliance team. This means the CFTC probably won’t randomly shut them down one day. But it also means they can only create new markets with CFTC permission. In July, Kalshi asked the CFTC for permission to make midterm election prediction markets - specifically, which party will win control of the House and Senate. The CFTC has said they will make a decision by October 28 (which doesn’t leave much time for predicting to happen before the November 8 election, but I guess it sets a precedent). September was the Request For Comment period, when the CFTC solicited comments from stakeholders about what they should do. Kalshi tried really hard to get lots of people to send in positive assessments - I know this because of how many people asked me “why is the CEO of Kalshi emailing me about this thing?” Their strategy seems to have worked; among the people who wrote to the CFTC in support were: A managing director at JP Morgan
Inline links: additional plaintiffs, here, https://substackcdn.com/image/fetch/$s_!LaYa!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F0aaec309-35d6-430d-aeaa-b7cab022f4d6_548x215.png, Insight Prediction, Samotsvety Forecasting, Earlier this year, accepted lost wars gracefully, published an update, comment here, Swift Centre, They also took a swing at the nuclear question, https://substackcdn.com/image/fetch/$s_!TczM!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F702c1236-47d9-4c60-9b99-ab9b2ca320e7_737x377.png, a 4% chance, a 7% chance, 16% chance, In July, they will make a decision by October 28, A managing director at JP Morgan
Prediction Market FAQ
December 20, 2022 · Original source
7.6: …if I’m the head of the Commodity Futures Trading Commission?
Please legalize real-money prediction markets in the United States. If it helps, here are a bunch of really famous economists including a Nobel laureate explaining why you should do this.
Inline links: a bunch of really famous economists including a Nobel laureate
2023
January 31, 2023 · Original source
Taking Stock Prediction market users really want stocks. “Stock” in this sense means an instrument that measures the status of a person, group, or idea. When their status goes up, the stock goes up. When their status goes down, the stock goes down. It feels like a natural way to bet on things like “I’m bearish on Elon Musk and think everyone else is overestimating him.” It’s hard to turn this vague idea into a real financial instrument. You could try tying it to their Twitter follower count, or Google search trends, or net worth, but none of these exactly track “status”. If Musk commits murder in broad daylight, his search volume will go up, his Twitter follower count will stay about the same, his net worth might not be affected, but his status will have gone way down. The current solution is to make no effort whatsoever to moor stocks to the real world and just hope they work out. This could work! It’s kind of like a Ponzi scheme or crypto token. Some big influencer endorses MoonCoin, and MoonCoin goes up, because MoonCoin has gained status, which means more people will want to buy it, because it’s even more likely that more people will want to buy it later. Crypto tokens keep a fig leaf of “and maybe in the cyberpunk future when all transactions everywhere have switched to crypto this will really pay off”, but over time that fig leaf became increasingly threadbare, and a fun low-stakes instrument like Manifold stocks might do fine without it. But the 0% to 100% prediction scale is a bad match for stocks. If Elon started at 50% in 2000, then when Tesla made it big he surely should have doubled. And that brings him up to 100% and leaves nowhere for him to go. Also, people who bet on Elon Musk in 2000 might be miffed that their prescient choice only doubled their money. Probably the solution is some kind of cardinal number. But which one, and at what scale? Again, the lesson from crypto is that maybe it doesn’t matter. Just start at 10 or something or something and see where it ends up. Manifold leadership isn’t totally resigned yet to having stocks be meaningless Ponzi schemes. If you have a better idea for how to run stocks, leave it in the comments here and they’ll probably see it. CFTC vs. PredictIt Update So far it’s not clear if this means indefinite normal operation, or if they’ll spend the extra time trying to wind existing markets down. The overall chance of them winning their lawsuit remains unchanged at around 25%. PredictIt has gotten some sympathetic news coverage, including from the Washington Post. In the process, the Post tried to get some clarity on what terms of the no-action letter PredictIt violated, apparently without success: @CFTC why they're shutting PredictIt down. They give no real answer, just as in the original withdrawal letter. Closest thing we have to an answer is that they don't want other prediction markets. But why? No sense here at all. washingtonpost.com/lifestyle/2023… ","username":"RichardHanania","name":"Richard Hanania","profile_image_url":"","date":"Tue Jan 24 18:12:59 +0000 2023","photos":[{"img_url":"https://pbs.substack.com/media/FnQbawZaYAAKRws.jpg","link_url":"https://t.co/zeKhe8sjnT","alt_text":null}],"quoted_tweet":{},"reply_count":0,"retweet_count":8,"like_count":39,"impression_count":0,"expanded_url":{},"video_url":null,"belowTheFold":true}" data-component-name="Twitter2ToDOM"> @StephenPiment I'm flat appalled the CFTC said \"you violated terms\", but won't tell anyone, @PredictIt included, which ones, and then has big enough balls to try to get the judge to dismiss PI's \"shotgun\" defense. Um, with no info what other case COULD they make?\n","username":"kmett","name":"Edward Kmett","profile_image_url":"","date":"Sun Nov 27 19:01:29 +0000 2022","photos":[],"quoted_tweet":{},"reply_count":0,"retweet_count":8,"like_count":21,"impression_count":0,"expanded_url":{"url":"https://www.bonus.com/news/cftc-predictit-hearings-coming/","image":"https://substack-post-media.s3.amazonaws.com/public/images/8d5a1d5e-49ee-4294-84cd-eb5a4259bbc3_1200x800.jpeg","title":"Hearings Coming Soon in PredictIt Lawsuit, CFTC Asks to Dismiss","description":"The CFTC is seeking to have the PredictIt lawsuit dismissed, while the plaintiffs want the case fast-tracked due to the shutdown deadline.","domain":"bonus.com"},"video_url":null,"belowTheFold":true}" data-component-name="Twitter2ToDOM"> I guess they’ll have to give some kind of explanation during the hearing, right? Related: Richard Hanania has an article on How To Legalize Prediction Markets. The actual advice isn’t very surprising, and mostly boils down to “write letters to the government officials in charge of this”, but like other people I learned something new from the details: In the United States, prediction markets are, with a few minor exceptions, against the law. If you don’t have a legal background, you might think that means that Congress at some point considered the issue, decided people shouldn’t be able to bet on real world events, and passed a law to that effect, which was then signed by the president. But this is not what happened. As with most things, Congress has never directly considered the matter. Rather, prediction markets are illegal due to the discretion of a government agency called the Commodity Futures Trading Commission (CFTC). Why does it have this right? And on what basis has it made prediction markets illegal? […] In 1936, Congress passed and FDR signed the Commodity Exchange Act. In 1974, Congress created the CFTC to enforce the original law, which has been amended on multiple occasions over the years. The CFTC has authority to regulate what are called “derivatives markets.” A derivatives contract derives its value from some kind of underlying asset or benchmark in the real world. The thing to understand about derivatives is that the baseline is that they’re legal. That’s why you can “bet” on the price of oil through a futures contract. The CFTC wasn’t created to ban derivative markets, but to regulate them, though this can involve prohibiting certain kinds of markets altogether. Current law includes the following provision on event contracts, [banning]: activity that is unlawful under any Federal or State law;
Inline links: remains unchanged at around 25%, Washington Post, How To Legalize Prediction Markets, can involve
other similar activity determined by the Commission, by rule or regulation, to be contrary to the public interest So the CFTC may ban certain prohibited categories. With this statutory authority, it has decided to take advantage of its power to the maximum extent possible and create a blanket ban on all markets that involve “terrorism, assassination, war, gaming, or an activity that is unlawful under any State or Federal law.” Prediction markets for elections are therefore banned because, according to the CFTC, they are a type of “gaming,” that is, gambling. To repeat, and summarize for those whose eyes gloss over when faced with legalese, the steps are Congress says the CFTC can prohibit event markets that involve “gaming” if it’s in the public interest.
Inline links: create a blanket ban, they are a type
Congress says the CFTC can prohibit event markets that involve “gaming” if it’s in the public interest.
24
May 13, 2024 · Original source
The Commodity Futures Trading Commission, the body that thwarts real-money prediction markets, has announced that it will be thwarting them even harder from now on.
Disclaimer: This post involves more discussion of laws than usual. I am not a lawyer. Assume there are some errors. I will try to correct them after I learn about them. CFTC Extra-Double-Bans Prediction Markets The Commodity Futures Trading Commission, the body that thwarts real-money prediction markets, has announced that it will be thwarting them even harder from now on.
The proposed resolution is 17 CFR Part 40. It starts by explaining the current state of the law: the CFTC is allowed to regulate “events contracts”, ie predictions. The law says they should favor contracts about economic events (like “will interest rates go up”), and disfavor contracts about atrocities or gaming (like “will there be a terrorist attack?” or “will the Yankees win the World Series?”). Everything else - the bread and butter of prediction markets - is in a gray zone that the CFTC has to review on a case-by-case basis.
Inline links: 17 CFR Part 40