What is the dispute between Andreessen Horowitz and US states over prediction markets?

Andreessen Horowitz (a16z) is backing the Commodity Futures Trading Commission (CFTC) in a dispute with several US states trying to restrict prediction markets. States argue these platforms resemble gambling, while a16z says they fall under federal commodities law. The core issue is whether federal or state regulators have authority. This decision could shape how widely prediction markets can operate.

Why is a16z supporting the CFTC on prediction markets?

A16z argues that the CFTC has primary authority over prediction markets and event contracts. The firm believes state-level bans conflict with federal rules designed to ensure open market access. It also says fragmented regulation could harm innovation. Supporting the CFTC aligns with maintaining a unified national framework.

How do state bans affect platforms like Kalshi and Polymarket?

State restrictions can force platforms like Kalshi and Polymarket to block users based on location. This reduces the number of participants in the market. Fewer users typically means lower liquidity, which can make markets less efficient. It also limits access for retail traders in restricted states.

Why does liquidity matter in prediction markets?

Liquidity refers to how easily users can enter and exit trades without affecting prices. A16z warns that restricting access reduces liquidity, making markets less accurate and harder to trade. Prediction markets rely on broad participation to generate reliable price signals. Lower liquidity can weaken their usefulness.

Are prediction markets considered gambling or financial products?

This is the central debate. State regulators view contracts on sports or political outcomes as gambling. A16z argues these are financial instruments under the CFTC’s jurisdiction. The final classification will determine which rules apply and who regulates them. This remains unresolved.

How big is the prediction market industry right now?

The article notes that monthly trading volume reached $25.7 billion in March. More than 80% of users are retail traders, typically trading less than $10,000. This shows strong grassroots participation. It also highlights why access restrictions could impact a large user base.

Why does a16z say prediction markets are valuable?

A16z argues that prediction markets improve price discovery, meaning they help estimate the probability of future events. They aggregate crowd opinions into tradable prices. This can provide insights that traditional polling or forecasting may miss. The firm sees them as useful financial tools, not just speculative platforms.

What role does blockchain play in platforms like Polymarket?

Blockchain-based platforms like Polymarket provide on-chain transparency, meaning all transactions are publicly verifiable. A16z says this improves oversight and accountability. It can make it easier for regulators to monitor activity. This is presented as an advantage over traditional systems.

A16z backs CFTC in prediction market clash

Written by BloombergPublished May. 3 2026Last Updated May. 3 2026

Andreessen Horowitz has backed the Commodity Futures Trading Commission in opposing state efforts to restrict prediction markets, arguing such actions conflict with federal law.

The firm submitted a letter responding to the CFTC’s proposed rulemaking, warning that state-level crackdowns on platforms like Kalshi and Polymarket undermine the agency’s mandate to ensure impartial market access.

A16z said measures such as cease-and-desist orders and criminal enforcement force exchanges to block users by location, reducing liquidity and limiting participation for retail traders.

“Being forced to deny impartial access to users in states that seek to license or prohibit certain event contracts will likely severely circumscribe available liquidity,”

The firm wrote.

State regulators argue that contracts tied to sports and political outcomes amount to unlicensed gambling, but A16z countered that defining “gaming” falls under the CFTC’s authority.

The firm also highlighted the role of prediction markets in price discovery, stating that they aggregate crowd insights on uncertain events and improve market efficiency.

It added that blockchain-based platforms enhance transparency through on-chain auditability, while growing adoption has pushed monthly trading volumes to $25.7 billion, largely driven by retail users.