Coinbase releases its response to the CFTC’s Notice of Proposed Rulemaking.
The platform urges the commission to withdraw the proposal, citing concerns about its content and analytical approach.
Paul Grewal points out the inconsistencies in the CFTC’s definition of gaming.
Coinbase, a major cryptocurrency exchange in the United States, has responded to the Commodity Futures Trading Commission’s (CFTC) Notice of Proposed Rulemaking issued in May 2024. The company has called on regulators to withdraw the proposal, citing major concerns about its content and analytical approach.
Providing key insights on Coinbase’s letter dated August 8, 2024, Chief Legal Officer Paul Grewal shared a series of threads on the X platform. As a critical and primary concern, Grewal pointed out the inconsistencies in the definition of “gaming” in CFTC’s proposal. While CFTC included contracts like Nobel Prizes and Oscars in their narrative, Grewal proclaimed that they are by no means gaming.
Chief Legal Officer Paul Grewal shared insights into Coinbase’s August 8, 2024 letter on X (formerly Twitter). A key concern highlighted was the inconsistency in the CFTC’s definition of “gaming.” While the CFTC included contracts like Nobel Prizes and Oscars in its narrative, Grewal argued that these are not gambling activities.
Simply put, the proposal has a definition problem. The sweeping definition of “gaming” in the proposal captures contracts like Nobel Prizes and the Oscars which, by any common understanding, are not, in fact, gaming. This definition of “gaming” is also inconsistent with…
— paulgrewal.eth (@iampaulgrewal) August 9, 2024
In its letter, Coinbase asserted that the CFTC failed to differentiate between market speculation and actual gambling in the proposal. The letter further argued that few would consider events like elections or professional awards, such as the Nobel Prize or Academy Awards, as games, yet these were the very examples used to define “gaming” in the proposal. Grewal stressed that this definition could be misleading and deviated from established legislative history.
For context, the US CFTC had previously proposed a clear rejection of event contracts or prediction market trading. While the proposal defined gaming as betting on the outcomes of political contests, awards, or athletic events, it received support from three Democratic commissioners.
Further challenging the CFTC’s claims of acting upon “public interest,” the Coinbase lawyer argued that the CFTC’s categorization of contracts is not beneficial to the public. In its letter, Coinbase questioned the regulator’s statutory authority to categorize the contracts. The company added that the proposal failed to acknowledge the public benefits of prediction markets.
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