The agency maintains oversight of political outcome contracts and is fighting a court case to prevent platforms from offering such speculative products.
Rostin Behnam, Chairman of the US Commodity Futures Trading Commission (CFTC), said in an interview with Bloomberg Television that the agency finds itself “stretched thin” over the issue of election prediction markets being classified as derivative contracts, thanks to a federal court judgment that legalized betting on election outcomes.
He argued that the contradictions of maintaining oversight on derivative contracts of the political speculation market have driven the agency to an inflexion point. CFTC is still fighting the federal court’s decision that allowed betting platforms to accept wagers on US election results.
“The contracts will continue to grow, and we will have to monitor them closely,” a Bloomberg report quoted Behnam as saying.
Conventionally, the CFTC is mandated to regulate financial products rather than speculation contracts.
Thanks to the court order, Kalshi claims that the CFTC regulates it on its website. At the time of going to press, it offered odds of 59 for Donald Trump and 41 for Kamala Harris to win the 2024 US Presidential election.
Crypto Concerns
CFTC is believed to be more concerned about crypto betting sites such as Polymarket, which offer betting on election outcomes. They allow bettors from outside the US to wager millions of dollars on the US election results, potentially influencing the opinion of US voters.
According to the latest report in Forbes, Polymarket, which has given Republican candidate Donlad Trump an odds of 66 (currently 64) to win the Presidential race over Democrat Kamala Harris, has $2.25 billion in bets trading on the race. However, reports of manipulation and Polymarket investigation into recent large bets are also making the rounds.
Kalshi Legal Battle
On October 2, the District of Columbia Circuit Court of Appeals set aside CFTC’s objections filed about a year ago to Kalshi, the New York-headquartered regulated exchange and prediction market, offering “event trading contracts.” In effect, it allowed Americans to wager on election outcomes, including the Presidential elections scheduled for November 5.
The CFTC has filed a fresh appeal, which the court has fast-tracked on its request. However, a decision on the CFTC’s appeal is likely only several months after the Presidential election is over.
“Kalshi has taken the decision as carte blanche to list dozens of election betting contracts, including bets on the outcome of the Presidential election, the winner of the popular vote, margins of victory, which state will have the narrowest margin of victory, and bets on numerous other state and federal elections,” CFTC said in its filing.
“Kalshi’s website previews other contracts, including what it refers to as ‘parlays’ (a term used in sports betting) on various election outcomes, as ‘coming soon.'”
