Kristin Johnson, who served as a commissioner of the U.S. Commodity Futures Trading Commission (CFTC), delivered a farewell speech at the Brookings Institution. In her address, she sharply criticized the recent approval of prediction markets and expressed concerns about the trends toward deregulating the cryptocurrency industry promoted by the administration of President Donald Trump.
This is reported by Finway
Criticism of Prediction Markets and Deregulation of the Crypto Industry
Johnson, who has represented the interests of the Democratic Party at the CFTC since 2022, stated that innovation should not come at the expense of the stability of financial markets. She emphasized that loosening regulatory requirements could create risks for the economy and society. The commissioner noted that the decision to approve prediction markets was a mistake, as the agency and other market participants do not fully understand how these platforms operate in practice.
“I am disappointed that during my time at the Commission, we have not been able to successfully advance a final rule regarding the introduction of contracts on political events. Market activity in recent months confirms my concerns and those of others regarding prediction markets.”
Johnson also pointed out that after the CFTC’s loss in court against the prediction market Kalshi, the platforms were allowed to offer contracts on political events. Additionally, in light of her statements, the American market Polymarket received permission to operate in the U.S.
Licensing Issues and Approach to Innovation
According to Johnson, the regulator does not have sufficiently effective “protective barriers” to oversee new products emerging in the market. She expressed concerns about the potential offering of credit products to retail clients, which could create additional risks. In particular, some companies are buying or renting licenses to operate in the prediction market space, but after obtaining permission, they change their business direction or resell licenses to other entities.
Johnson called for a cautious approach to the deregulation of crypto assets, emphasizing that the decisions made now will shape the foundation for economic development for future generations.
“In several cases, these companies apply to the Commission for licenses to offer traditional products, but after obtaining a license, they quickly change direction and seek to self-certify contracts in the prediction market. In other cases, companies that have received a license quickly sell their new licenses to others,” she noted.
Johnson concluded her speech with a call for transparency and integrity in financial markets:
“Do not lie. Do not deceive. Do not steal,” she summarized.