Comment Text:
I am writing to express my strong opposition to the proposed rule that would ban event contracts related to elections on regulated exchanges. This rule is misguided and counterproductive for several reasons:
Regulated markets provide valuable information
Election markets on regulated exchanges can serve as powerful predictive tools, aggregating diverse information and providing valuable insights into public sentiment and likely electoral outcomes. This data can be utilized by researchers, policymakers, and the public to better understand political trends and voter preferences.
Consumer protection and market integrity
Banning these contracts on regulated exchanges will not eliminate demand, but rather push activity to unregulated offshore markets or illegal betting operations. Regulated exchanges offer essential consumer protections, transparency, and market integrity that are absent in underground markets.
Risk management tool
Event contracts related to elections can serve as legitimate risk management tools for businesses and investors to hedge against policy and geopolitical risks. Prohibiting these instruments removes a potentially valuable financial tool from the marketplace.
Innovation and competitiveness
The proposed rule stifles financial innovation and puts U.S. markets at a competitive disadvantage globally. Other jurisdictions allow election-related derivatives, and the U.S. should not fall behind in developing these markets.
Overreach of authority
The CFTC's mandate is to regulate derivatives markets, not to act as an "election cop" or arbiter of the democratic process. This rule exceeds the Commission's expertise and Congressional mandate.
Mischaracterization as "gaming"
Classifying election-related contracts as "gaming" mischaracterizes their nature and potential utility. These contracts can serve legitimate economic purposes beyond mere speculation.
Instead of an outright ban, the CFTC should work to develop a balanced regulatory framework that allows for the responsible trading of election-related contracts on regulated exchanges while addressing legitimate concerns. This approach would better serve the public interest by promoting market innovation, protecting consumers, and preserving the integrity of both our financial markets and democratic processes.
I urge the Commission to reconsider this proposal and engage in further dialogue with stakeholders to develop a more nuanced and forward-thinking approach to regulating event contracts.
