CFTC Proposes Strategic Overhaul to Curtain Political Betting

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The United States Commodity Futures Trading Commission (CFTC), a key regulating body in the nation’s financial landscape, is making moves to exert greater controls over the burgeoning arena of political wagering. The government agency has tabled a proposal to overhaul its operating guidelines, seeking to clamp down on the proliferating practice of betting on political outcomes on online platforms, colloquially referred to as betting exchanges.

Where betting on political events is par for the course in countries like the United Kingdom and much of Europe, in America, it remains a practice shrouded in regulatory grey areas. Betting exchanges, which have been exploiting these loopholes, operate by enabling peer-to-peer transactions facilitating the trade of stakes or shares on political outcomes. Officials at the CFTC are of the conviction that it is essential to bring such activities firmly under the scrutiny of the law to ensure that the nation’s electoral mechanisms continue to function with integrity.

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On a recent Friday, the CFTC presented an amendment to their operating regulations designed to exclude all political events, as well as other markets, from such wagering activities. The proposed modifications strive to specifically target “event contracts” that involve activities such as “gaming, war, terrorism, assassination” and any other activity deemed illegal by federal and state law.

Proponents of political betting argue that their event contracts furnish valuable insights into electoral contests and serve as a crucial educative tool for the general populace. In an equally contentious issue in 2014, the CFTC issued a pivotal exchange, embroiled in political betting, the assurance of “No-Action Relief”, guaranteeing the platform protection against legal repercussions for enabling customers in the United States to wager on political results.

However, the progression of time saw the CFTC revoke this concession in August 2022, invoking a legal skirmish in the federal court. The agency confirmed that there has been a marked influx in the operations offering political wagering, especially since sports betting witnessed an exponential growth in the aftermath of the Supreme Court’s historic decision to expand this practice back in May 2018.

The implementation of the proposed amendments would, for the first time in CFTC’s history, define “gaming.” If approved, the CFTC’s new regulations would ban all wagering contracts betting on the results of political contests, awards ceremonies, sporting events, or any occurrence related to these types of competitions.

With a deadline set until July 9, 2024, the CFTC is soliciting public feedback on the proposed regulatory revisions to event contracts. Comments received will undergo review and then will be published on the CFTC’s official website.

The chair of the CFTC, Rostin Benham, echoes the urgency of banning political event contracts, arguing that the survival of the agency hinges on refocusing its energies on its original mandate – supervising derivative markets, including futures, swaps, and options. Benham, who was assigned his role by President Donald Trump in July of 2017 and reaffirmed by President Joe Biden in 2021, expressed his conviction that any allowance of such contracts would push the financial market regulator into an uncomfortable situation, far removed from its intended jurisdiction and expertise. In no uncertain terms, he voiced, it would erroneously transform the CFTC into an election overseer.