Andreessen Horowitz has sided with the Commodity Futures Trading Commission in the escalating fight over prediction market oversight, arguing that event contracts should fall under exclusive federal jurisdiction rather than a patchwork of state rules. The firm warned that state-level cease-and-desist orders and proposed bans risk fragmenting access, weakening liquidity and pushing trading activity offshore.
The filing matters because prediction markets are becoming a test case for how U.S. regulators define financial market access in an on-chain environment. If state gambling laws can override federal market supervision, platforms may face inconsistent restrictions that complicate compliance, surveillance and user eligibility.
a16z Frames Event Contracts as Federal Swaps
a16z argued that event contracts traded on prediction platforms qualify as swaps under the Commodity Exchange Act and therefore belong within the CFTC’s exclusive remit. The firm said forcing exchanges to block users based on state residency would conflict with the CFTC’s mandate to provide impartial access.
Miles Jennings, general counsel at a16z, described prediction markets as “information machines” that convert dispersed public knowledge into observable prices. That framing positioned the products not as gambling instruments, but as markets that can produce useful signals when properly supervised.
The filing did not ignore manipulation concerns. a16z proposed prohibited-trader lists for “Event Controllers,” or participants with the ability to influence contract outcomes. It also recommended Determinations Committees staffed by subject-matter experts to resolve ambiguous events, along with stronger CFTC and SEC surveillance coordination across correlated markets.
State Pushback Raises Liquidity and Insider-Risk Questions
The letter arrived as the CFTC sued several states, including Illinois, Arizona, Connecticut, New York and Wisconsin, over attempts to apply state gambling laws to federally supervised prediction markets. The agency has also cited federal appeals court rulings in KalshiEx LLC v. Schuler and KalshiEx LLC v. Orgel that supported its preemption argument in sports-related event contracts.
At the same time, political concerns have intensified. U.S. senators and staff were banned from trading on prediction markets, while states including New York and Maryland prohibited government employees from participating because of insider-trading risk.
Those restrictions show why the issue is not simply jurisdictional. Prediction markets raise real questions about access to non-public information, market manipulation and improper influence over outcomes.
Michele Korver, head of regulatory at a16z crypto, framed the firm’s engagement as an effort to support a coherent federal framework rather than leave platforms exposed to fragmented state enforcement.
The next phase will unfold through CFTC rulemaking and litigation. The outcome will determine whether prediction markets operate under a single federal standard or remain subject to state-by-state restrictions, with major consequences for liquidity, compliance architecture and on-chain traceability.