Venture capital firm Andreessen Horowitz came out in support of the Commodity Futures Trading Commission, pushing back against a wave of state-level crackdowns on prediction markets.

In an 18-page comment letter to the CFTC on Friday, the VC firm, commonly referred to as a16z, said that actions being taken by state regulators against prediction market platforms, including cease-and-desist letters and proposed bans, are creating a "serious barrier to impartial access" for users.

In just the past month alone, the CFTC has filed a string of lawsuits against Illinois, Arizona, Connecticut, New York, and Wisconsin, arguing that the states are acting outside of their jurisdiction by trying to regulate markets that are overseen by the federal government. 

A16z argued that requiring exchanges to block U.S. users based on the state they reside in conflicts with the CFTC's rules on fair access to markets.

"Being forced to deny impartial access to users in states that seek to license or prohibit certain event contracts will likely severely circumscribe available liquidity," the firm wrote.

CFTC Chairman Mike Selig has asserted that prediction markets' event contracts qualify as swaps, placing them under its "exclusive jurisdiction."

State regulators and attorneys general have pushed back, saying that platforms like Kalshi and Polymarket offer unlicensed gambling products.

A16z also wrote about the utility that it says prediction markets offer, saying that their pricing systems act as a "unique form of price discovery" that helps "reveal probabilities for uncertain events."

The firm also argued that blockchain-based prediction markets are more transparent than traditional platforms, saying the "auditability of onchain transactions" makes it easier for participants and regulators to monitor.

In April, the leading prediction markets Polymarket and Kalshi saw their cumulative lifetime volumes cross $150 billion, following months of surging use.