A16z Supports CFTC Amid State Crackdown on Prediction Markets

Venture capital firm Andreessen Horowitz has backed the Commodity Futures Trading Commission in an escalating dispute over the regulation of prediction markets, warning that state-level actions risk fragmenting access across the United States.

In a detailed comment letter, the firm criticized recent moves by state regulators—including cease-and-desist orders and proposed bans—arguing they create a “serious barrier to impartial access” for users. The debate centers on whether prediction market platforms should fall under federal oversight or be subject to individual state restrictions.

State-by-State Rules Could Harm Liquidity and Market Access

A16z argued that forcing platforms to block users based on their state of residence conflicts with the CFTC’s fair access principles. According to the firm, such fragmentation would likely reduce liquidity and weaken the effectiveness of these markets.

The CFTC has recently taken legal action against several states, including Illinois, Arizona, Connecticut, New York, and Wisconsin, asserting that they are overstepping by attempting to regulate markets that fall under federal jurisdiction. CFTC Chairman Mike Selig maintains that event-based contracts offered on prediction platforms qualify as swaps, placing them under the agency’s exclusive authority.

Prediction Markets Face Gambling Criticism Despite Growth

State officials and attorneys general have pushed back, claiming platforms such as Polymarket and Kalshi resemble unlicensed gambling operations.

However, A16z emphasized the broader utility of prediction markets, describing them as tools for price discovery that help quantify probabilities for uncertain real-world events. The firm also highlighted the transparency of blockchain-based systems, noting that onchain transactions allow for improved auditability compared to traditional platforms.

The sector has seen rapid growth, with Polymarket and Kalshi surpassing a combined $150 billion in lifetime trading volume in April, underscoring rising demand despite regulatory uncertainty.