Polymarket is managing to hold its ground despite regulatory pressures on election-related prediction platforms.

The Commodities Futures Trading Commission (CFTC) recently introduced a proposed rule targeting prediction markets, which led to Kalshi becoming the latest platform affected. This uncertainty has begun to impact Polymarket, raising concerns about its future in the current regulatory environment.

According to Dune, Polymarket has seen a significant drop in daily active traders, decreasing by 39.4% from 12,595 on Wednesday to 7,627 on Sunday. Similarly, daily trading volume plummeted 85.6%, falling from $37.2 million to $5.35 million over the same period.

The decline in activity mirrors the broader challenges facing election-related prediction platforms amid increased regulatory scrutiny. As reported by BeInCrypto, the Commodities Futures Trading Commission (CFTC) has proposed a rule to limit certain event contracts, particularly those tied to political events, contributing to the downturn in Polymarket’s metrics.

Read more: Crypto Regulation: What Are the Benefits and Drawbacks?

According to the commodities regulator, event contracts like those offered by Polymarket carry risks associated with election-related gambling. Several crypto executives have resisted this attack, including Ethereum co-founder Vitalik Buterin, Gemini co-founders the Winklevoss twins and Coinbase CLO Paul Grewal.

However, the CFTC remains firm, as shown by its ongoing conflict with Kalshi, a US-based prediction market for event contracts. The CFTC argues that markets like Kalshi are vulnerable to manipulation, citing specific examples in its filings:

It is worth mentioning that this is not the first of Kalshi’s encounters with the CFTC. In November 2023, the platform filed a lawsuit against the regulator, challenging a decision to bar Kalshi from listing political event contracts on potential Congress chambers’ leaderships.

Fast-forward to September 6, District Court Judge Jia Cobb ruled in favor of Kalshi, partly allowing it to offer election-related betting.

“Kalshi just legalized trading on elections in the US. For the first time in 100 years, Americans will have access to legal election markets at scale. Historic moment for financial markets,” Kalshi’s founder, Tarek Mansour, shared on X.

However, the CFTC challenged this determination, filing an emergency motion for a 14-day stay on Kalshi’s election markets. The regulator also filed a notice to appeal the court’s decision, but Judge Cobb criticized the move, calling out the regulator for overstepping its authority by trying to shut down Kalshi’s election markets.

The regulator’s push to block Kalshi has made prediction market participants skeptical about Polymarket, with some saying it could be next. One user on X, however, advertising as an “iGaming regulation expert,” calls for a balance between innovation and democracy.

“It’s clear that the intersection of prediction markets and election integrity is a tightrope walk. The CFTC’s concerns highlight the need for rigorous oversight. But let’s ponder — can we strike a balance where innovation thrives without compromising democratic principles?” the user wrote.

Read more: How Can Blockchain Be Used for Voting in 2024?

Even as prediction markets face criticism from regulatory bodies, mainstream companies are interested in these event contracts. Recently, Bloomberg integrated Polymarket on its terminal. This suggests increasing recognition of the role of decentralized prediction platforms as the November elections approach.

The post Polymarket Activity Drops 40% as CFTC Seeks to Halt Kalshi Prediction Platform appeared first on BeInCrypto.

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