CFTC Cites Risks of Election Betting Amid Trust Issues

The commission is currently in a lawsuit with Kalshi, a New York-based startup that seeks to offer futures contracts on political election outcomes. A district court ruling allowed Kalshi to place bets on the upcoming U.S. congressional elections for now, but an appeals court has temporarily halted those bets pending the outcome of the case.

The CFTC’s primary concern is the risk of manipulation of betting markets. The commission cites past examples of potential dangers. In 2012, a trader bet $7 million on Mitt Romney to win the presidential election to create the impression of a closer contest and boost Romney’s campaign. In 2017, a rigged poll showed musician Kid Rock leading in a Michigan Senate race, which also affected bets, even though Rock never ran.

The CFTC argues that such cases do not represent isolated events, but rather a pattern of manipulation of betting markets that could further distort perceptions of elections. The commission believes that increased betting on elections will only exacerbate the problem and damage public trust, which is already eroded.

For its part, Kalshi defends its position, noting that other platforms offering election prediction markets already operate without regulation. The startup argues that its efforts to seek federal approval for its betting practices demonstrate an effort to be open and fair. However, the CFTC rejected these arguments, comparing the situation to a store trying to sell illegal goods, arguing that such bets already exist on the black market.

As the case continues in court, the debate over the impact of election betting on U.S. politics has become increasingly urgent. The CFTC believes that the potential risks of election betting far outweigh any potential benefits, and is seeking to stop it in all regulated markets. Kalshi, on the other hand, argues that banning election betting is hurting its business, although the CFTC believes this is an exaggeration.