Comment Text:
Bottom line, no one wants to see gambling on elections. These should not be allowed in casinos, and should not be allowed in bucket shops, and should absolutely not be allowed on illegal shadow shops where there is no visibility, and no record of who’s doing what. In that regard, Public Citizen and Common Cause got it right. And their armies of commenters got it right too. Gambling on elections is bad. What they all missed, though, is that this is not gambling on elections.
These commenters provide no analysis and draw no thread to explain why they think that Kalshi’s contract is gambling and not legitimate market activity. You cannot fail to note these comments utterly fail to explain how they address the matter that is before the CFTC. A simple conclusion, unsupported and undeveloped, that gambling is bad, without even asserting that the contract they are commenting on is gambling and why, must be disregarded. It is obvious good public policy to give meaning to commenters , but the CFTC cannot project its own bias (which is well established and obvious) against these contracts onto the commenters. There is a world of difference between translating and applying what a commenter means to writing the commenter’s comment for her. In this case, a legal conclusion (gambling) that is unsupported cannot become supported by some supplied analysis from the CFTC. The Kalshi contract is not gambling and trading the contract is not gambling, and comments regarding gambling are neither here nor there. It is extremely likely that these comments are the result of an email that went out from several private interest groups like Public Citizen and Common Cause, as evidenced by the letters themselves, and the comments are not sent in response to the Kalshi contract, but to the email prompts.
Additionally, you will be hard pressed to distinguish the Kalshi contract from any other contract that you regulate, like Brent Crude, WTI, corn and orange juice futures. What would make these contracts not gambling and the Kalshi contract gambling? The answer, according to the commenters is . . . nothing, because the commenters completely fail to even address what would make the Kalshi contract gambling in the first place. Accordingly, if the CFTC tries to hang its hat on these comments, you are acknowledging that all of your products are gambling. It’s a bit of a zero sum game over here, if you adopt an intellectually honest view. Kalshi’s contract does not have any distinguishing features that can be used to differentiate between it and your typical futures contract. Those contracts are not gambling, and Kalshi’s contract is not different.
Surprisingly, all these comments also support Kalshi’s contract. These thousand or so comments all note that elections are not games, and accordingly, the contract does not fall under the rule in 40.11. Accordingly, it would be illegal and violate the APA for the CFTC to prohibit these contracts.
Furthermore, many if not all of these comments express a sentiment with zero analysis of how it relates to the specific contract in front of the CFTC. Despite being touted with conviction, they remain alarmingly unsupported by any credible evidence, making them nothing more than unsubstantiated conjectures.
It would be deeply troubling that such baseless claims would be utilized by the Commission. As an agency entrusted with the critical responsibility of regulating commodity futures trading, the CFTC must uphold the highest standards of transparency, rigor, and impartiality. Yet, these comments fall woefully short of meeting those standards and risk undermining the trust that the public has vested in this esteemed institution.
Contrary to the evidence, these comments appear to turn a blind eye to the comprehensive body of data and research available on electoral matters. They seem to wilfully ignore the substantial body of evidence that illustrates the multifaceted challenges faced by elections and the tireless efforts already in place to address them. In doing so, they portray an incomplete and skewed perspective that can lead to misguided conclusions and decisions.
Additionally, merely a day after the 5th Circuit handed a victory to the PredictIt market, it is clear that these commenters are completely unaware of the fact that the PredictIt market will be operating for the foreseeable future, and not only that, it will be operating on what the 5th Circuit has noted is a license from the CFTC! It would be the height of caprice for the CFTC to prohibit these contracts while the PredictIt market continues without any of the Core Principles that protect investors.
And critically, these commenters, by completely ignoring the actual evidence from the years, nearly a decade, of PredictIt data that contradict their concern, render their comments not only unsupported, but contradicted by the evidence.
Further, these comments ignore the reams of evidence to the contrary of their conclusions.
The Benefits of Market Data on Election Integrity:
One of the most disconcerting aspects of these comments is their failure to recognize the invaluable insights derived from the PredictIt market. This dynamic platform serves as a powerful barometer of public sentiment, and overlooking its potential impact on public interest would be a glaring oversight. To dismiss the PredictIt market is to ignore a valuable source of real-time data that offers a more comprehensive understanding of public sentiment.
The Increase in Voter Engagement that Election Markets Will Generate:
Moreover, introducing election markets can foster increased voter engagement and participation. By creating a platform where citizens can have a financial stake in the electoral process, these markets incentivize greater civic involvement and encourage individuals to be more informed about the candidates and their policy positions. Consequently, election markets will have a positive impact on voter education and political discourse. This is what years of data show.
The Distinction Between Gambling and Legitimate Market Activity:
Critics may attempt to blur the line between gambling and legitimate market activity in the context of election markets. However, it is essential to distinguish between speculative gambling and the principled practice of financial market participation. The CFTC, with its expertise in overseeing various regulated markets like corn, gold, and oil, can apply its rigorous framework to ensure that election markets operate within ethical and legal boundaries.
The Parallels Between an Election Market and Traditionally CFTC-Regulated Markets:
Drawing parallels between election markets and traditional CFTC-regulated markets, such as commodities, demonstrates the fallacy of labeling one as gambling and not the other. Both types of markets involve risk and uncertainty, yet the presence of risk alone does not make them gambling endeavors. By recognizing the similarities, the Commission can objectively evaluate the merits and potential risks of election markets.
Public Comments and the Weight Given to Them:
The notion of assessing public interest as a mere vote count is deeply flawed and unsound. Public interest determinations must be rooted in substantive data, meticulous analysis, and reasoned judgment. Reducing public interest to a mere tally of opinions overlooks the nuance and complexity of societal issues, and it is a disservice to the democratic principles we cherish as a nation. As such, public comments that clearly did not even read the issues should not be given weight in the decision-making process.
In a country with a diverse population numbering in the hundreds of millions, it is patently capricious to assert that the views of a handful of individuals, even if they number in the thousands or tens of thousands, should dictate the course of action. The Commission's duty is to scrutinize the substance and merits of ideas and not be swayed solely by the volume of voices advocating for or against them.
In conclusion, I urge the Commission to steadfastly adhere to its mission of ensuring fair and transparent regulation of commodity futures trading. To protect the public's trust and confidence in the CFTC, it is imperative to dismiss unfounded claims that lack empirical backing and compromise the integrity of the decision-making process.
I implore the CFTC to prioritize a rigorous examination of data and evidence, demonstrating a firm commitment to upholding the values upon which this esteemed institution was founded. By doing so, the Commission will reaffirm its role as a beacon of integrity, actively fostering an environment of trust, accountability, and reason.
Thank you for your unwavering dedication to your vital responsibilities, and I earnestly hope that my concerns are given the utmost attention and consideration they deserve.
