Comment Text:
Mr. Christopher Kirkpatrick
Secretary of the Commission
Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street NW
Washington DC 20581
Dear Mr. Kirkpatrick,
Thank you for taking the time to read this note. I appreciate the Commission’s recent efforts to clarify the rules related to event contracts.
I write to you as a concerned citizen and student who has spoken to dozens of people (including current and former CFTC members, professionals at Kalshi and PredictIt, academics, journalists, and political strategists) about political prediction markets.
I disagree with Proposed Rule 8907-24. This would deprive Americans of valuable information and limit innovation in the United States. I believe the Commission’s concerns about election integrity and being an “election cop” are misplaced.
I agree with George Mason University Economics Professor Robin Hanson (https://comments.cftc.gov/Handlers/PdfHandler.ashx?id=33688) that political prediction markets offer concrete social benefits. They allow traders to hedge risks associated with political outcomes and they benefit the public by providing information regarding likely election winners. Many studies demonstrate the information value these markets generate (over political commentators).
I agree with Senator Tuberville’s concerns (recently expressed to Chairman Behnam in a letter) that rules limiting event contracts listed by Designated Contract Markets (DCMs) “will drive innovative companies overseas” and “place U.S. markets at a competitive disadvantage.” For example, Polymarket has demonstrated market value and become one of the largest global prediction markets (>$200M in volume year-to-date, larger than CFTC-regulated markets such as Kalshi or PredictIt) but has focused on customers abroad since the CFTC's January 2022 settlement. This deprives the American public of the information value provided by the most comprehensive and well-developed prediction market. Banning existing US-focused prediction markets will cause further harm.
I agree with Representative Torres that election integrity concerns expressed by this Commission and other legislators are overblown (https://www.politico.com/f/?id=00000184-3518-d0bb-a1ff-377b6ae70000). Malicious actors already have large incentives to influence election outcomes, whether it be financial interest (e.g. one candidate’s proposed tax bill is more favorable) or ideology. In fact, prohibiting these markets can threaten election integrity by “worsening the public’s understanding of our democratic process.”
The Honorable Chair Rostin Behnam has stated that allowing political event contracts would “put the CFTC in the role of an election cop.” I agree that the CFTC should not police elections. However, CFTC Commissioner Mersinger wrote in her dissent on the recent proposal to ban election prediction markets that the CFTC, “has enforcement authority with respect to natural gas… but that does not mean the CFTC… is tasked with the protection of the integrity of physical natural gas or power markets… the Federal Energy Regulatory Commission does all that.” Similarly, the Federal Election Commission (FEC) will continue to protect our elections, regardless of whether election prediction markets are approved or not.
Also, the CFTC is already wading into products beyond its traditional domain when it comes to blockchain. The Commission should approve political event markets, even if such markets are beyond the traditional regulatory scope of the CFTC, given they are in the public interest. Even if this involves
I recognize legitimate concerns about the downsides of these markets. However, I believe narrow regulatory guidelines for markets focused on political outcomes – with clear reporting requirements – can bring innovation back to US soil and serve the public interest. I believe these benefits outweigh the concerns.
Respectfully,
Zane Stiles
