Several Democrat representatives wrote to the US derivatives regulator yesterday (5 August) urging it to approve a tabled ban on election bets.
The letter, signed by eight Senate and House Democrats, called on the Commodity Futures Trading Commission (CFTC) to approve its previously proposed ban on election bets.
It follows the CFTC’s rule, proposed on 10 May, that would classify event contracts on the outcome of political contests as “gaming”, and therefore prohibited under the agency’s rules.
The letter read: “Election gambling fundamentally cheapens the sanctity of our democratic process. Political bets change the motivations behind each vote, replacing political convictions with financial calculations.
“Allowing billionaires to wager extraordinary bets while simultaneously contributing to a specific candidate or party, and political insiders to bet on elections using non-public information, will further degrade public trust in the electoral process,” it added.
The five senators that penned their names to the letter included former presidential candidate Elizabeth Warren, Jeffrey A. Merkley, Sheldon Whitehouse, Richard Blumenthal and Chris Van Hollen.
The House Democrats were Jamie Raskin, John P. Sarbanes and Eleanor Holmes Norton.
Members argue CFTC cannot regulate election bets
The representatives argued political event contracts do not serve the economic purpose of futures markets, and the Commission does not have congressional mandate to regulate election and campaign activity.
They highlighted that placing a bet on the outcome of an election was already prohibited by over a dozen states nationwide.
The letter continued: “The last thing that voters heading to the polls need are bets waged on the outcome of that election. Voters need action, as proposed by the CFTC in this rule, to restore trust.
“Elections are not a for-profit enterprise. Without this rule, voters will wonder if their vote mattered, and whether the outcome of the election was influenced by big money bets.”
As such, the politicians said offering federal bets potentially represented an unlawful breach of the state’s responsibilities in regulating and administrating federal elections.
Many prediction markets operate through the regulated derivatives market to offer their services, including Kalshi, PredictIt and Polymarket.
The regulator has turned decisively against election bets in recent years, opting in August 2022 to withdraw PredictIt’s no-action letter that had up to that point protected it from enforcement action.
Both PredictIt and Kalshi are currently engaged in separate litigation against the CFTC following the agency’s attempts to clamp down on their activities.
The proposed rule that would ban election bets is currently in the comment period, with that set to close later this week on 8 August.