CFTC Promises Scrutiny of Election Wagering Sites

Posted on: October 22, 2024, 09:09h. 

Last updated on: October 23, 2024, 09:50h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

The Commodities and Futures Trading Commission (CFTC) is pledging to diligently monitor platforms offering financial contracts tied to political outcomes as Election Day nears.

CFTC political betting wagering election odds
The headquarters of the US Commodity Futures Trading Commission in Washington, DC. The commission is promising to police election betting markets. (Image: Shutterstock)

The commission, which is engaged in a lengthy legal spat with financial exchange and prediction platform Kalshi, views itself as the sheriff in a wagering arena it considers to be the Wild West. Speaking from the Bloomberg Global Regulatory Forum in New York on Tuesday, Chairman Rostin Behnam told Bloomberg Television he sees the CFTC as an “elections cop.”

We’ll pursue any action, as we do in any part of our markets,” he told the news outlet.

Behnam’s comments arrived a week after a federal appeals court in Washington DC fast-tracked a complaint by the commission seeking to block Kalshi from offering bets on US elections.

CFTC Already Polices Kalshi

Benham didn’t get into specifics regarding how the CFTC will step up its law enforcement-esque efforts pertaining to election markets, but the commission is already the regulator to which Kalshi and rival PredicIt answer.

The reason for the CFTC holding regulatory sway over those companies is simple. Unlike a traditional sportsbook operator that books bets based directly on an event, Kalshi and PredicIt allow clients to purchase what are akin to futures contracts. Futures are considered derivatives and the CFTC is the regulator for those assets.

Regulated US sportsbooks are prohibited from booking bets on elections. However, Kalshi and PredicIt aren’t flouting US laws. The use of derivatives helps, as does the fact these platforms and others like them aren’t election-only betting venues.

For example, Kalshi clients can currently use the site to “bet” on economic data, stock index moves, and even pop culture events such as award shows. The site even offers a slew of bets related to Taylor Swift.

CFTC Policing Efforts Could Be Difficult

The extent to which the CFTC can monitor election-related betting could hinge on a court ruling that may or may not be happening prior to Election Day on November 5. Additionally, activity on Kalshi and PredicIt is likely to increase as Election Day draws closer and could continue swelling if various results aren’t known on election night. Such a volume uptick would be a natural response by participants in those markets, not an implication of something nefarious.

In some circles, there are concerns about unregulated election wagering offerings, such as Polymarket. That crypto-based exchange has seen a surge in new account openings due to this being a presidential election year. Like its regulated rivals, Polymarket offers an expansive menu of wagering options, not just political bets.

Some critics speculate that foreign money piling into election betting markets could color US voters’ opinions of the presidential race. As of this writing, Kalshi shows former President Donald Trump (R) with a 60% chance of winning, or a 20-point lead over Vice President Kamala Harris (D).