In a letter to the CFTC Commissioners on Wednesday, Coinbase criticized the CFTC’s broad definition of “gaming” and argued that the definition unfairly restricts valuable event engagements.

The CFTC’s proposal, released in May, defines “gaming” as betting on the outcomes of political races, prizes and athletic events. The proposal was supported by three Democratic commissioners who cited concerns about market integrity and the agency’s role.

Coinbase emphasized that this broad definition does not take into account the public interest by uniformly banning prediction markets.

Paul Grewal, Coinbase’s General Legal Officer, used the following statements in his letter:

“This all-or-nothing approach does not serve the purpose of promoting responsible innovation and growth in regulated and transparent markets. In such markets, appropriate protective measures are required to maintain market integrity and protect customers.”

Coinbase argues that prediction markets play an important role in market dynamics and that their effectiveness contributes to the public good.

Coinbase warned that the CFTC’s definition of “game” could include many contracts that are not actually considered games. The company stated that such a broad definition would unfairly restrict contracting for events with social and economic benefits, such as sporting events.

“If adopted, the rule will treat contracts that are not generally considered games as ‘games’,” Coinbase said, adding that this situation is incompatible with the legislative history regarding gaming.

The company emphasized that prediction markets for sporting events have practical uses, such as hedging t-shirt printing costs on whether a team will win a championship.

In its letter, Coinbase also stated that the CFTC considers speculation to be gaming, but does not distinguish clearly enough the difference between market speculation and actual gambling.

The company noted that events such as elections or professional awards are not typically awarded through a process that could be described as gaming. However, he noted that the CFTC’s proposal presents such examples as a game.

The proposal also envisions banning conventions on war, terrorism and assassination. Polymarket offers contracts related to geopolitical events, such as whether Iran will take military action against Israel.

Coinbase argued that such contracts could be useful in predicting world events and that the CFTC ignored the important benefits of prediction markets. The company emphasized that prediction markets have the potential to gather efficient information and surpass traditional forecasting methods.

Coinbase is calling on the CFTC to withdraw the broad, categorical ban and continue to review it on a contract-by-contract basis, evaluating the public interest of each prediction market category.

“We call on the CFTC to withdraw this proposal and collaborate with academic, industry and policy stakeholders to develop a more balanced approach that encourages innovation and protects the public interest,” Grewal said in his post on X.