Outgoing CFTC Commissioner Kristin Johnson used a farewell speech at the Brookings Institution to flag gaps in oversight for fast-growing prediction markets and crypto platforms, saying regulators currently have “too few guardrails” and limited visibility into these products.
The warning came the same day the Commodity Futures Trading Commission issued a no-action letter clearing prediction market Polymarket to resume U.S. operations after it acquired regulated exchange QCX for $112 million. Johnson framed the development as an example of why tighter rules matter when retail investor dollars move quickly into new markets.
Johnson singled out a trend she called “rent or buy”, where firms obtain licenses only to pivot rapidly into event contracts or to transfer those permissions to others. She argued that this practice can create weak governance and expose consumers to outsized losses—pointing to past crypto collapses such as Terra/Luna, Celsius and FTX as evidence that poor controls lead to systemic harm.
Her concerns arrive amid broader agency activity: the CFTC has signaled routes for foreign exchanges to access U.S. business through a foreign board of trade framework, and regulators issued a joint SEC-CFTC statement on spot crypto that drew criticism for lacking concrete clarity. Former SEC chief of staff Amanda Fischer described the statement as falling short of answering key questions for market participants.
Johnson urged policymakers and firms to prioritize the “twin pillars” of market health—consumer protection and stability—and called for practical controls on leverage, custody, incentive structures and retail risk. Her closing admonition was plain: “Don’t lie. Don’t cheat. Don’t steal.”
Risk considerations: prediction markets expanding into retail finance without stronger rules heighten compliance and consumer-protection risks. Firms should expect intensified regulatory scrutiny and possible enforcement action if governance and transparency do not improve.
Source: Decrypt. Read the original coverage for full details.