According to the CFTC, a producer of smart contracts who knowingly uses the blockchain to develop event contracts that are predictive can be held liable by the United States regulators. One of the commissioners at the CFTC, during an event in Dubai on Tuesday, talked about how already existing laws can still apply to new technologies like blockchain.
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According to him, since smart contracts have almost limitless application and can be easily customized, they can be used to replicate typical financial instruments. Some individuals use blockchain technology to create smart contracts that can predict future events in a broad scale. In his words:
“These contracts are essentially going to allow people to use digital currency to place bets on events on various industries like sports and government. Users will be paid automatically if the prediction is correct. This kind of activity is classified under the prediction market where people use binary options, event contracts and many other types of contracts to bet on future events.
CFTC and prediction markets
Before now, the CFTC has always stood against prediction markets because they are not done in the interest of the public. To illustrate, some event contracts can be based on things that aren’t of public interest like terrorism, assassinations, war, etc. The CFTC reserves the right to prohibit such event contracts”.
According to Quintenz, CFTC will determine the nature of events contracts using traditional means. He continued:
“From the above description, the CFTC is concerned about any event contract that is created for profit and has to do with predicting future events for specific sums of money. As long as the even contract falls within our jurisdiction, it is subject to our regulations whether or not it is executed through ISDA or as a software code”.
“If it is determined that the smart contract developer knew that the code will be used to violate the CFTC’s regulation, then the coder will be prosecuted accordingly. These codes are typically designed to enable certain types of activity that should be regulated by the CFTC. This is why coders are encouraged to seek advice from CFTC staff to ensure that their product is compliant with our regulations before deploying them”.