The Commodities and Futures Trading Commission (CFTC) is pledging to diligently monitor platforms offering financial contracts tied to political outcomes as Election Day nears.
The commission, engaged in a lengthy legal dispute with financial exchange and prediction platform Kalshi, views itself as the regulator in a wagering arena it likens to the Wild West. Speaking from the Bloomberg Global Regulatory Forum in New York earlier today, 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 stated.
His comments came a week after a federal appeals court in Washington, DC, expedited a complaint by the commission seeking to block Kalshi from offering bets on US elections.
Benham refrained from detailing how the CFTC will intensify its regulatory oversight of election markets, but the commission is already the authority that Kalshi and its rival PredicIt report to.
The reason for the CFTC’s regulatory hold over these companies is straightforward. Unlike traditional sportsbooks that base their bets directly on an event, Kalshi and PredicIt enable clients to purchase contracts akin to futures. Futures are considered derivatives, and the CFTC is the designated regulator for such assets.
Regulated US sportsbooks are prohibited from accepting bets on elections. However, Kalshi and PredicIt are not violating US laws. The use of derivatives aids, as does the fact these platforms are not exclusively election betting venues.
For example, Kalshi clients can currently use the site to “bet” on economic data, stock index movements, and even pop culture events such as award shows. The site also offers numerous bets related to Taylor Swift.
The extent to which the CFTC can monitor election-related betting might depend on a court ruling that may or may not occur before Election Day on November 5. Furthermore, activity on Kalshi and PredicIt will likely surge as Election Day approaches and could continue swelling if various results aren’t known on Election Night. Such volume increases would be expected in those markets and wouldn’t necessarily indicate any wrongdoing.
There are concerns in some circles about unregulated election wagering offerings, like Polymarket. This crypto-based exchange has seen a surge in new account openings due to the presidential election year. Similar to its regulated rivals, Polymarket offers a broad range of wagering options, not limited to political bets.
Some critics worry that foreign money entering election betting markets could influence US voters’ opinions of the presidential race. As of this writing, Kalshi shows former President Donald Trump with a 60% chance of winning, leading Vice President Kamala Harris by 20 points.