The Hyperliquid Policy Center and Multicoin Capital have jointly backed the U.S. Commodity Futures Trading Commission’s (CFTC) proposed framework for regulating prediction markets, arguing that clear federal rules would provide greater certainty for both exchanges and market participants.
Their comments were submitted on July 27, the deadline for public feedback on the proposal. Both organizations believe that transparent regulations would help companies develop compliant event contracts while reducing uncertainty caused by shifting regulatory interpretations across different administrations.
Industry backs clearer federal standards
The CFTC introduced proposed amendments to Regulation 40.11 in June to establish a clearer process for reviewing event-based prediction contracts.
Under the proposal, regulators would evaluate contracts using a three-step process that considers:
- Whether the product qualifies as an event contract.
- Whether it involves restricted subjects such as gaming, war, terrorism, assassination, or illegal activities.
- Whether allowing the contract would conflict with the public interest.
Instead of imposing blanket bans, the proposal would allow regulators to assess each contract individually during a review period of up to 90 days.
Hyperliquid and Multicoin argue that this approach offers far more certainty than relying solely on evolving regulatory interpretations.
One federal regulator should oversee prediction markets
A key recommendation in the joint filing is that the CFTC should remain the sole federal regulator responsible for exchange-listed prediction markets.
The organizations emphasized that regulated prediction markets differ significantly from traditional sports betting or gambling.
In prediction markets, participants trade contracts with one another through regulated exchanges, while the platform simply facilitates transactions and collects fees.
They argue this structure places prediction markets under federal derivatives law rather than state gambling regulations.
Settlement event should determine compliance
The filing also recommends that regulators focus on how contracts are settled, rather than making decisions based only on a contract’s topic.
For example, merely mentioning subjects such as war or gaming should not automatically place a contract into a prohibited category.
Instead, regulators should examine the specific event that determines the contract’s payout.
This settlement-based approach closely aligns with the CFTC’s proposed framework and would provide clearer guidance for companies designing new event contracts.
Industry requests greater transparency
Hyperliquid and Multicoin are also encouraging the CFTC to provide more public explanations after reviewing prediction market contracts.
Currently, regulators explain why they reject certain contracts.
However, the groups believe approvals should also include written reasoning.
Publishing both approvals and rejections would help companies better understand regulatory expectations and improve future contract submissions.
They also requested that the Commission release additional examples covering more complex or borderline cases.
CFTC seeks more detailed filings
The proposal follows recent efforts by the CFTC to strengthen its review process.
Earlier this month, the agency warned exchanges against relying on broad template-based self-certifications when submitting new products.
Instead, regulators expect detailed information covering:
- Contract terms
- Settlement methods
- Data sources
- Compliance analysis
These requirements aim to improve oversight while allowing legitimate products to reach the market more efficiently.
Hyperliquid’s expanding prediction market ambitions
Hyperliquid’s interest in the proposal reflects its growing presence in prediction markets.
In May, the platform launched HIP-4 outcome contracts, which allow users to trade fully collateralized prediction markets that settle at either zero or one.
Unlike perpetual futures, these contracts do not rely on leverage or liquidation mechanisms.
The platform later expanded its offering beyond cryptocurrency markets, including prediction products tied to real-world economic events.
As Hyperliquid continues broadening its ecosystem, clearer regulatory guidance could become increasingly important for future product development.
Legal questions remain unresolved
Although the proposed rules could provide greater clarity for federally regulated exchanges, they would not resolve every legal issue surrounding prediction markets.
Several U.S. states continue challenging prediction market operators under state gambling laws.
At the same time, prediction market platforms argue that federally regulated derivatives exchanges should fall exclusively under the authority of the CFTC.
Those legal disputes are still working their way through U.S. courts, meaning additional rulings may shape the industry’s future alongside any new federal regulations.
Outlook
The joint submission from Hyperliquid Policy Center and Multicoin Capital highlights growing industry support for a consistent national framework governing prediction markets.
Both organizations believe transparent federal standards would reduce regulatory uncertainty while encouraging innovation in event-based financial products.
As the CFTC reviews public comments before issuing a final rule, the outcome could play an important role in determining how regulated prediction markets evolve in the United States, even as broader questions surrounding decentralized platforms and state authority remain unresolved.
