The fight over the new market is escalating

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“Contracts involving political events ultimately commoditize and degrade the integrity of the uniquely American experience of participating in the democratic electoral process,” CFTC Chair Rostin Behnam said.
“Allowing these contracts would push the CFTC, a financial market regulator, into a position far beyond its Congressional mandate and expertise.
Mersinger, who said she is not a “fan” of all event contracts, expressed concern that the proposal reaches beyond the CFTC’s authority.
Event contracts are effectively designed to provide investors a way to bet on any range of outcomes.
More event contracts have listed for trading in the last three years than in the previous 15 combined, Behnam said.
Currently, event contracts cannot relate to certain categories including war, terrorism, assassination and gaming.
In a letter last week, Johnson and six other lawmakers on both sides of the aisle similarly raised concern about pushing the event contracts market out of the U.S.
But many Democratic lawmakers and critics have raised concern about the idea of election products.

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According to CFTC Chair Rostin Behnam, “contracts involving political events ultimately commoditize and degrade the integrity of the uniquely American experience of participating in the democratic electoral process.”. “To approve these contracts would place the Financial Markets Task Force (CFTC), a financial market regulator, well beyond the purview of its Congressional mandate and experience. To put it plainly, the CFTC would take on the role of election police under such contracts. “.

Commissioners Kristin Johnson and Christy Goldsmith Romero, two other Democratic colleagues, backed Behnam’s proposal. Republicans Summer Mersinger and Caroline Pham, who serve on the panel, voted against the proposal. Mersinger expressed her disapproval of event contracts in general and expressed concern that the proposal goes beyond the CFTC’s jurisdiction.

The proposal intensifies the fierce competition over the future of political betting markets in the U.S. s. Recent moves by Behnam’s agency to shut down the well-known platform PredictIt and turn down a bid by a derivatives exchange startup called Kalshi to bet on elections show how much they have tightened their scrutiny. However, Kalshi and PredictIt have retaliated by filing lawsuits disputing the agency’s rulings.

The plan was deemed “ill-conceived” and “a mistake” by PredictIt’s co-founder and CEO, John Aristotle Phillips. “.

“We urge the Commission to embrace innovation and develop a reasonable regulatory framework that keeps Americans in regulated U.S. markets, rather than trying to shut down and restrict event contract markets.”. s. markets and not take this worthwhile activity offshore,” a statement from Phillips read.

Effectively, event contracts are made to give investors the ability to wager on a wide variety of results. Kalshi, for example, provides markets regarding whether the U. s. the number of times the Federal Reserve will lower interest rates, the year-over-year ban on TikTok, and Costco membership rates. Election-specific contracts, such as those pertaining to the November election, are available from PredictIt.

Proponents of the products claim that they are meant to give investors and companies a new tool to safeguard their portfolios and businesses against economic downturns, geopolitical risks, or, in the case of election-betting contracts, policy fluctuations. For example, someone heavily invested in electric vehicle stocks who is also anticipating a second Trump administration might use an event contract to hedge against the possibility that Biden won’t win in November.

In order to determine the opinions of voters, economists, journalists, and insiders in Washington can also utilize data generated by election-betting markets.

Market interest in the products is rising. According to Behnam, more event contracts have come up for trading in the last three years than in the fifteen years prior.

Nonetheless, the CFTC has discovered over the years that plans pertaining to election betting would be illegal. As of right now, event contracts are not applicable to certain categories, such as gaming, terrorism, war, or assassinations. Additionally, they cannot be connected to any actions that would contravene state or federal law or act against the “public interest.”.

Nevertheless, the agency is working to address the “ambiguities” Behnam refers to in the law. According to Behnam, the agency’s proposal, for example, defines “gambling” for the first time to include award shows, political contests, and athletic events.

For “the preservation of the protection and integrity of our electoral Democratic processes,” according to Johnson, the CFTC’s proposal is also essential. “.

“The process of decision-making that underpins our elections must continue to be sacrosanct, as free and fair elections have been a fundamental cornerstone of power in democracy,” the speaker declared.

The CFTC’s plan won’t likely be finalized for months because it would need another commissioner vote. Meanwhile, it seems inevitable that the proposal will be the focus of a flurry of Washington lobbying activity.

After the vote, Kalshi CEO Tarek Mansour announced that the company will be discussing the plan with Congress and the CFTC. “To ensure that our customers can participate in legitimate trading with legitimate use cases on a legitimate, regulated exchange and not on offshore and illegal markets where there is no customer protection or market integrity,” he stated, is the goal of this initiative.

A few legislators, such as Rep. Dusty Johnson, R-S. D. ) requested that the CFTC exercise caution in the lead-up to Friday’s vote. Johnson expressed concern about forcing the event contracts market out of the United States in a letter sent last week along with six other lawmakers from both parties. S.

However, the concept of election products has alarmed a number of Democratic lawmakers and opponents. The previous year, Sen. Kalshi’s plan is “a clear threat to our democracy and elections,” according to Oregon Representative Jeff Merkley. “.

Although the financial reform advocacy group is still examining the proposal, Cantrell Dumas, director of derivatives policy at Better Markets, praised the goal of the CFTC’s plan.

“Today’s proposed rulemaking, if strong and clear enough, will not only protect our democracy’s fundamental principles but also serve as a check on the gamification of our democratic outcomes, making sure that speculative betting doesn’t compromise the credibility of the CFTC or our electoral processes,” stated Dumas.

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