Paradigm, an investment firm founded by Fred Ehrsam, one of the co-founders of Coinbase, is backing the prediction market platform Kalshi in its legal dispute with a U.S. regulatory body, as indicated in a recent court document.
In September, the Commodity Futures Trading Commission (CFTC) issued an order disapproving of Kalshi’s contract, which enabled users to place bets on the likely control of the U.S. Congress in the next term.
The CFTC argued that the contract involved activities deemed unlawful under state law and resembled “gaming.”
Kalshi filed a lawsuit against the regulator two months later, arguing that the agency had gone beyond its authority.
“While Kalshi isn’t a crypto company, we felt compelled to intervene in this case because we believe that prediction markets are one of the potentially revolutionary use cases for crypto,” Paradigm said in a post on Monday.
According to Paradigm, political events play a crucial role for crypto firms as they influence future regulations in the industry. The firm, in its amicus brief filed in the U.S. District Court for the District of Columbia, emphasized that observing people’s bets on certain outcomes helps crypto companies adjust their corporate strategies and mitigate regulatory risks.
Paradigm also pointed out in a blog post that the likelihood of Congress passing legislation affecting U.S.-based crypto startups is directly tied to the political party in control or the government’s division.
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