The U.S. Commodity Futures Trading Commission (CFTC) is taking steps to evaluate wagering on politics and other major real-world events.
The CFTC has proposed a rule to ban event contracts that are used to wager on politics, award shows, and other popular events in American culture. The rule, which was approved by a 3-2 vote by the CFTC, also bans event contracts involving sporting events. The three CFTC commissioners approved the ban amid election integrity concerns related to betting.
“Contracts involving political events ultimately commoditize and degrade the integrity of the uniquely American experience of participating in the democratic electoral process,” said CFTC Chair Rostin Behnam. “Allowing these contracts would push the CFTC, a financial market regulator, into a position far beyond its Congressional mandate and expertise.”
The CFTC’s approval of the ban comes amid an active legal dispute over political betting, which is prohibited by gaming regulators nationwide.
Earlier this year, U.S. District Judge David Alan Ezra transferred a lawsuit that accuses the CFTC of acting “arbitrarily and capriciously” in an attempt to shutter the operations of political betting provider PredictIt. The New Zealand-based company sued the CFTC after the commission withdrew a no-action letter in 2022 that allows PredictIt to over political betting markets if certain conditions are met, including not operating for a profit.
PredictIt’s lawsuit was initially dismissed by the Western District Court of Texas for an injunction but was overturned by the Fifth Circuit appeals court before being referred the D.C. District Court. There are currently attempts to send the suit back to Texas, which includes issuing a writ of mandamus in March to retransfer the case from D.C.
The desire to prohibit political betting is also impacting KalshiEX, a regulated exchange where you can buy and sell event contracts. Last September, the CFTC issued an order disapproving political event contracts offered by KalshiEX. The New York-based exchange is challenging the CFTC’s order in the D.C. District Court.
