Blockchain.com pursues CFTC approval for prediction markets: CNBC

Blockchain.com has reportedly applied to the US Commodity Futures Trading Commission for approval to offer two related products. One is event contracts, which are used in prediction markets. The other is crypto derivatives, financial contracts linked to cryptocurrency prices or other outcomes. The move matters because approval could give the company a regulated route into US prediction markets and derivatives.

The company reportedly applied for a designated contract market license and a futures commission merchant license. The first would support an exchange for event contracts. The second would support brokerage services for derivatives contracts. Blockchain.com previously announced a planned prediction-markets integration with Polymarket in its app.

Approval is not guaranteed. US courts are considering disputes involving prediction-market platforms, while states challenge some sports- and election-related contracts. Blockchain.com could therefore enter a contested market with its own event-contract marketplace if the CFTC grants approval.

The company reportedly filed applications for two licenses with the CFTC. They are a designated contract market license, known as a DCM, and a futures commission merchant license, known as an FCM. Together, they would cover both marketplace operations and brokerage services for US customers.

A DCM license would allow Blockchain.com to operate as a futures exchange for event contracts. These contracts are tied to whether an event happens or reaches a stated result. An FCM license would allow the company to act as a broker for derivatives contracts. That would support transactions for customers rather than only running a marketplace.

The applications matter because Blockchain.com could offer its own event-contract marketplace if approved. The company had already announced a Polymarket integration for its app. The CFTC process is taking place while courts and state authorities dispute how prediction markets should be overseen.

A prediction-market event contract is a financial contract tied to a clearly defined future event. In general, traders buy positions linked to possible outcomes, such as whether a result occurs. The contract’s price reflects what participants collectively think about that outcome. It matters because people can trade views about events instead of simply making informal predictions.

For example, a contract could ask whether a particular election result or sports outcome will occur. A trader expecting “yes” would buy the relevant position, while someone expecting “no” could take the opposing position. When the event is resolved under the contract’s rules, the winning position receives the settlement value and the losing position does not.

The article does not provide a specific contract example or explain settlement terms. It does show why the product is controversial: state authorities allege that some sports and election contracts violate betting laws. Blockchain.com is seeking approval to offer event contracts through a regulated marketplace.

Kalshi and Polymarket face legal pressure because state authorities allege that some of their contracts violate laws concerning betting on sports and elections. Prediction markets can offer contracts tied to real-world outcomes, but states may view certain sports or election contracts as prohibited bets. That creates a dispute over which rules apply and who has authority to enforce them.

The article identifies lawsuits by many state-level authorities against prediction-market companies. It also reports that New Jersey officials filed a petition with the US Supreme Court in their case against Kalshi. The petition asks the nation’s highest court to weigh in on the dispute, though the article does not state whether the Court accepted it.

The lawsuits make regulatory approval especially important for Blockchain.com. Even if the CFTC approves its applications, state challenges could continue shaping how event contracts operate in the United States. The courts’ decisions may clarify the relationship between federal oversight and state betting laws.

CFTC approval would change Blockchain.com from a company planning an integration into a potential direct provider of regulated market services. US-based retail and institutional investors could access its event contracts and crypto-derivatives offerings through the approved structures. The article does not specify product limits, fees, or launch dates.

The DCM application would allow Blockchain.com to operate a futures exchange for event contracts. The FCM application would allow it to operate as a broker for derivatives contracts. This distinction matters: one license supports the marketplace where contracts are traded, while the other supports customer brokerage for derivatives.

The practical result would depend on the CFTC granting both applications and on continuing legal developments. State authorities are challenging prediction-market companies over sports and election contracts. Therefore, approval could expand customer access, but it would not remove the broader disputes over state enforcement and federal jurisdiction.

The dispute spans federal and state governments because prediction markets can be treated as regulated financial products or as betting activities governed by state law. The CFTC oversees commodities markets and, according to Chair Michael Selig, has exclusive jurisdiction over prediction markets. States, meanwhile, have brought lawsuits alleging violations of laws against betting on sports and elections.

The conflict is visible in the cases involving Kalshi and Polymarket. State-level authorities have lawsuits pending against companies over their contracts. New Jersey officials also petitioned the US Supreme Court to weigh in on the state’s case against Kalshi. That could help resolve disagreements between federal and state regulators.

The outcome matters for Blockchain.com’s reported applications. A CFTC license could authorize its proposed exchange and brokerage activities, but state objections may still affect particular contracts or operations. The article presents the courts as the place where this division of authority is being tested.

Crypto derivatives are financial contracts whose value is linked to cryptocurrencies or crypto-market prices. They can let customers trade an agreement tied to a future price or another defined outcome without simply buying the underlying crypto asset. Exchanges provide marketplaces, while brokers handle customer transactions. The article groups these products with Blockchain.com’s proposed CFTC-regulated offerings.

The reported FCM application would allow Blockchain.com to act as a broker for derivatives contracts. Safeguards are important because customers place money with firms that arrange or support these trades. CFTC Chair Michael Selig said proposed rules would bring safeguards to crypto spot markets and prevent the theft of customer funds. He cited the collapse of FTX.

FTX filed for bankruptcy in November 2022, and several executives faced criminal charges, including former CEO Sam Bankman-Fried. The article does not detail every proposed safeguard. It shows the policy goal: licensed crypto businesses should reduce risks to customer funds as regulation advances.