Published on: October 22, 2024, 09:09h.
Last updated on: October 22, 2024, 09:09h.
The Commodities and Futures Trading Commission (CFTC) is committed to closely monitoring platforms that offer financial contracts tied to political outcomes with Election Day approaching.
The commission, currently in a legal dispute with financial exchange and prediction platform Kalshi, sees itself as the regulator in an industry it views as uncontrolled. Speaking at the Bloomberg Global Regulatory Forum in New York, Chairman Rostin Behnam referred to the CFTC as an “elections cop.”
We’ll take necessary actions, as we do in all parts of our markets,” he informed the news outlet.
This statement comes after a federal appeals court in Washington DC hastened a complaint from the commission aiming to stop Kalshi from offering bets on US elections.
CFTC’s Current Oversight on Kalshi
Behnam did not elaborate on how the CFTC plans to increase its policing efforts regarding election markets, but the commission currently regulates both Kalshi and rival PredictIt.
The reason the CFTC has regulatory authority over these companies is because unlike traditional sportsbooks that accept bets directly on an event, Kalshi and PredictIt allow users to buy futures contracts, which are considered derivatives that fall under the CFTC’s jurisdiction.
US regulated sportsbooks are not permitted to accept bets on elections. However, Kalshi and PredictIt are not violating US laws as they use derivatives and offer bets on a variety of other topics in addition to elections.
For instance, Kalshi users can place bets on economic data, stock index movements, and pop culture events such as award shows. The platform even offers a range of bets related to Taylor Swift.
Challenges in CFTC Policing Efforts
The CFTC’s ability to monitor election-related betting may depend on a court ruling that could or could not happen before Election Day on Nov. 5. Additionally, activity on Kalshi and PredictIt is likely to surge closer to Election Day and could continue rising if results are not readily available on Election Night, which is a normal market response and not necessarily suspicious.
There are concerns in some circles about unregulated election betting platforms like Polymarket. This crypto-based exchange has seen a rise in new account openings due to the presidential election year. Similar to regulated platforms, Polymarket offers a wide range of betting options beyond politics.
Some critics are worried that foreign investments in election betting markets could influence US voters’ perceptions of the presidential race. Currently, Kalshi shows former President Donald Trump (R) with a 60% chance of winning, giving him a 20-point lead over Vice President Kamala Harris (D).