CFTC issues no-action letter to Bitnomial, clearing way for event contracts

The no-action letter comes amid growing acceptance by US regulators of prediction-style markets and event contracts during an election year.

The Commodity Futures Trading Commission (CFTC), a US financial regulator, issued a no-action letter to crypto derivatives exchange Bitnomial on Thursday, clearing the way for the exchange to offer event contracts and prediction markets.

The CFTC letter alleviates Bitnomial from the strict reporting requirements for asset swaps under current US rules, a hurdle that is impractical for fast-moving platforms like prediction markets, where tens of thousands of these swaps may occur in a day.

Bitnomial must still provide transparent consumer-facing data on its website, including timestamps and sales data for contract markets, and provide relevant data to the CFTC when requested, according to the terms of the letter.

All positions must also be collateralized, meaning they cannot be leveraged and must be backed 1:1 to ensure liquidity and prevent cascading liquidations that threaten the platform's solvency.

The no-action letter reflects the growing acceptance of prediction markets from US regulators, as blockchain technology opens up new financial use cases that were not possible with legacy financial infrastructure.

Related: Bitnomial gains CFTC approval to launch prediction markets in US

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