Paradigm, a venture capital firm led by Coinbase co-founder Fred Ehrsam, has filed legal briefs supporting prediction market platform Kalshi in its lawsuit against the Commodity Futures Trading Commission (CFTC).
In that case, Submitted in November, Mr. Carsi asked the court to reverse the CFTC’s refusal to list a contract regarding which political party will control each house of the U.S. Congress after the election. Regulators concluded that New York-based Kalsi pursued illegal gambling “against the public interest.”
Paradigm, which is not an investor in Calci, said in an amicus brief filed on Thursday that such agreements could hedge risks for companies, including crypto startups, while creating positive spillover effects for the general public. argued that it could be useful.
The paradigm is in play in its optimistic predictions. length–is weakened Prediction markets, especially those operated on crypto rails (unlike CFTC-regulated Calsi, which settles bets in USD). In such markets, participants bet on the outcome of real-world events, from weather to military exercises.
For example, Bitwise Asset Management is expected in December. report “More than $100 million has been bet on prediction markets, which will emerge as the new ‘killer app’ for cryptocurrencies.” Bitwise analyzed data from The Block and DeFirama, and this number is expected to rise in the second half of 2021. It is said to be twice the peak that reached .
Polymarket, a crypto-based prediction market platform, recorded its highest trading volume ever in January, according to data from Dune Analytics Shared by X (Formerly Twitter) By Rob Haddick, general partner at Dragonfly, another VC firm.
“Paradigm is interested in this litigation because prediction markets are a potentially impactful use case for the cryptocurrencies and related technologies in which Paradigm invests,” the company said in a filing with the U.S. District Court for the District of Columbia. “I have this,” he said.
For example, the brief describes the hypothesis of “entrepreneurs launching cryptocurrency startups in the United States.” The likelihood that Congress will pass legislation affecting the viability of U.S.-based crypto startups is directly affected by which political party controls Congress. …Thus, entrepreneurs may want to purchase event contracts where payments are made depending on which party takes the lead. ”
Reflecting the long-standing argument in favor of prediction markets, the brief states, “When market participants hedge large sums of money in specific event contracts, the general public, even those who have never participated in the market, are exposed to valuable real-time information.” You can get it,” he continued.
Paradigm said such markets “may even be able to predict election outcomes more accurately than polls, precisely because they require participants to put their lives on the line and participate in the game.”
Another friend-of-the-court brief filed Thursday also supported Kalsi, this one by a prominent legal scholar.
Joseph A. Grundfest, a professor at Stanford Law School, similarly argued for the public interest.
“In a world where poll response rates are extremely low, polarization is intense, and fake news is rampant, prediction markets provide an objective measure of the probability of a particular election outcome,” he said. wrote.
The CFTC has about a month to respond to Carsi’s motion for summary judgment and file its own friend-of-the-court brief. Mr. Carsi is expected to respond to the motions in March, and arguments in the case could conclude in early April.