Comment Text:
I am an economist and US citizen currently living in the United Kingdom.
Prediction markets for elections are, in effect, another form of crowdsourced political polling. While I respect that the CFTC is worried about the impact of election betting on undermining election results, in current election prediction markets there is not enough money at stake for people to be incentivized to undermine an election. If the CFTC would like to permanently cap the amount people could bet, much as the amount that people can donate to elections is capped, this would support their main objective while still allowing for the benefits of elections markets. Research suggests that election forecasts can predict election results better than polls alone can.
Election betting is not new to the US; it was present prior to 2012. None of the CFTC's concerns are new; they were present back then as well, under a state and elections that were much more lightly regulated, and yet research from economic historians Paul Rhode and Koleman Strumpf suggests that political processes were not corrupted by any election betting. They note that "the experience [in political betting] suggests that many current
concerns about the appropriateness of prediction markets are not well founded in
the historical record" (https://pubs.aeaweb.org/doi/pdfplus/10.1257/0895330041371277).
Moreover, other countries have successfully implemented election betting without the catastrophic effects that the CFTC fears. In the UK, where I live now, election betting is much more lightly regulated than in the US. Despite this, UK elections have not been undermined by the existence of said betting. Its elections are widely seen as free and fair.
