Outgoing CFTC Commissioner Kristin Johnson expressed concerns regarding the risks prediction markets pose to retail investors due to insufficient regulatory oversight. In her farewell address, she highlighted the problem of companies exploiting licensing loopholes to offer leveraged prediction contracts without clear regulatory guidance. Johnson noted her disappointment with the CFTC's inaction on rules for political event contracts, which have seen significant growth. She criticized trends in derivatives markets where firms quickly auction licenses for traditional products after approval and begin offering self-certified prediction markets. Drawing parallels to past financial crises, she warned that neglecting consumer protection and market stability could lead to severe consequences. Additionally, she pointed out the prevalence of poor internal controls in newer market entrants, including those in crypto and prediction markets, emphasizing the need for innovation to coexist with market stability.

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