The Commodity Futures Trading Commission voted to propose rulemaking to ban event contracts that allow betting on political events as the market expands rapidly.
Three of the CFTC’s commissioners voted to approve the proposal at Friday’s meeting, and the public can comment on the proposed rulemaking.
“Contracts tied to political events ultimately commodify and degrade the integrity of the unique American experience of participating in the democratic election process,” CFTC Chairman Rostin Behnam said Friday morning. “Allowing these contracts would place the CFTC, the financial markets regulator, in a position far beyond the authority and expertise of Congress. To put it bluntly, such contracts would force the CFTC to assume the role of election police.”
Event markets like Kalshi and Polymarket allow users to bet on the outcome of upcoming events, from the total snowfall in New York City this month to the severity of the likelihood of a recession this year. Last year, the CFTC released a report. Bespeak Oppose Kalshi’s contract that allows people to bet on political events. Kalshi accused the CFTC of exceeding its authority; apply At Paradigm, an investment company.
Behnam said there has been a “significant increase” in event contracts listed on CFTC-registered exchanges starting in 2021.
“Given this increase, more event contracts were listed for deals in 2021 than have been listed over the past 15 years – and this has continued to be true in every year since,” Behnam said.
The proposal states that contracts for events related to gaming, war, terrorism and assassinations will not be listed on the trade list or permitted to be cleared, Behnam added, adding that it is “against the public interest”.
“To be clear, this means that even contracts pertaining to the outcome of a political contest, such as an election, cannot be placed on a trade list or permitted to be cleared under the proposed rules,” Behnam said.
Commissioner Caroline Pham said the proposed rulemaking was “wrong.” palm It also asked the Government Accountability Office (GAO), an independent government agency, to conduct a study and make recommendations.
“I tell you that, despite a road paved with good intentions to get here, today’s event contract rulemaking is yet another example of how far the Commission has strayed from the requirements of the Administrative Procedure Act and the Constitution, and how petty the Commission appears to be. It’s painful, it’s about fairness and due process under the law,” Pham said.
Updated May 10 at 1:50 PM ET to include Director Pham’s comments to GAO.
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