Comment Text:
The proposed rule might as well be titled the off shore bookie enrichment act. It will do nothing to actually stop wagering on elections, but instead move it from a regulated and low limit environment into an unregulated and high limit environment, hurting traders and exacerbating all the issues the CFTC purports to care about.
The CFTC claims it is concerned about being an "election cop." Initially, this makes little sense. We already have a Federal Elections Commission that is an actual election cop as well as state level Secretaries of State who run elections and certify winners. So it is unclear what role the CFTC thinks it would have to play.
For instance, a market on say a Nevada Senate race can simply specify in its rules that the market will resolve when the state Secretary of State certifies the winner on X date in accordance with state election law. The CFTC does not have to make any determination, and the sources for determination are readily available. This is the case in every election in the United States. Tellingly, the CFTC cannot come up with a single example of how it would have to be an election cop.
The CFTC also claims that it is worried about the integrity of elections. Again, despite the fact that Predictit and other markets have existed for years there are no examples of markets actually hampering the integrity of elections.
In order to rig an election that one bet on, one would not only need to risk a long prison sentence, but presumably enter into a conspiracy with many other people by providing them a financial motive for such an extreme risk. Predictit has an $850 limit, there is no scenario in which risking all of that would be financially profitable.
I understand Kalshi is seeking larger limits and I think the CFTC and/or Congress might have a legitimate role to play in deciding whether say a six figure bet on say a single congressional or mayoral race is wise, but instead the CFTC has persisted in an arbitrary one size fits all policy. Again, if the CFTC cannot cite a single example from Predictit and the Iowa Electronics Markets long existence of any threat to election integrity, it's probably because it doesn't exist.
Finally, the proposed rule purports to ban election prediction markets as "gaming" even though the legistative history indicates that Congress only meant gaming in the context of sports gambling. Further, Congress specifically banned contracts in war, terrorism and assassinations, but not elections. Again, if Congress actually wanted election markets banned it would have said so.
With the Supreme Court poised to limit Chevron deference and the Fifth Circuit already having dealt the CFTC several preliminary losses, it seems unwise to continue down this path. I say this a someone who values the role administrative rule making plays in our system, the CFTC's arbitrary approach risks getting administrative rule making powers further curtailed for all agencies through legal precedent.
Election markets are a useful indicator of human behavior and should be regulated, not banned. The CFTC should reconsider its prohibitionist attitude.
