Posted on: July 25, 2023, 03:20h.
Last updated on: July 25, 2023, 03:20h.
Federal regulators have received more than 1,300 comments on a proposal that would widen access to political betting markets in the U.S.
Opponents of the proposal say it risks undermining the integrity of elections, while supporters say the markets are a valuable forecasting tool that have long existed in other countries without incident.
The Commodity Futures Trading Commission last month launched a 90-day review of a request from KalshiEX LLC to allow traders to place bets on which party will win the majority in the next congressional election. The first 30 days of that review was set aside for a public comment period, which ended Monday.
Kalshi is seeking CFTC approval for its congressional futures exchange for a second time after withdrawing a similar proposal following a report the commission would deny it last year.
The proposal drew opposition from Democratic members of Congress as well as advocacy groups including Common Cause, the Center for American Progress and Better Markets.
Supportive comments included those filed by Kalshi itself, the Coalition for Political Forecasting and Aristotle International, which helps operate the PredictIt marketplace.
Forecasting Value
Proponents of election markets pointed to the value they provide to researchers, journalists and members of the public, even those who do not place wagers themselves.
“PredictIt tends to experience heavy website traffic as election results are reported, usually far in excess of the number of individuals who are trading contracts,” Aristotle wrote in its comments to the CFTC. “This indicates that the public sees prediction market data as an important tool in understanding election results, which are often unclear and even misleading as individual counties across the country report partial results.”
Election Integrity Concerns
Opponents pointed to the growing influence of “dark money” in U.S. elections and said that allowing large bets to be placed on the outcome would further diminish the role of voters in the process.
“As betting apps proliferate on mobile phones, widespread gambling on our elections through the simple click of a button has an insidious effect upon the purpose, function and integrity of the electoral process,” wrote Reps. John Sarbanes and Jamie Raskin, both Democrats from Maryland.
“Moreover, since 2012, our nation has seen a deluge of dark money attempt to drown out the voices of voters, an undercurrent of election denialism and extremism, and an increase in politically-motivated violence,” they continued. “The proposed political event contract would only further incentivize such activity and encourage bad actors, or even those just looking to make a fast dollar, to interfere with our elections and seek to sway voters outside of the democratic process.”
Kalshi supporters said such concerns were unfounded.
“These questions effectively ask commenters to prove a negative. As difficult as that task is, real world evidence to disprove these hypothetical horribles is readily available,” Aristotle wrote. “Political prediction markets exist in advanced democracies sharing many cultural and political similarities to the US including the UK, Australia, and Ireland. Those markets have existed for many decades in their modern forms with no significant harm to electoral processes or campaigns.”
Next Steps
The CFTC has until the end of September to make a decision on Kalshi, but observers do not expect the commission to sign off on the market under its current leadership.
Separately, the CFTC is fighting PredictIt in court over an attempt to shut down that site after allowing it to operate since 2014. A federal appeals court last week handed PredictIt an interim victory that will allow it to keep operating for now.
