Rep. Ritchie Torres, a crypto-friendly Democrat from New York, has called on the U.S. Commodity Futures Trading Commission (CFTC) to regulate election markets in response to a recent court ruling that halted political prediction markets. This follows a federal appeals court’s decision to stop Kalshi, a regulated event market, from offering contracts on U.S. elections after the CFTC requested an emergency stay.
Election Market Regulation in Focus Torres’ letter to CFTC Chair Rostin Behnam encourages the agency to embrace responsible innovation while protecting consumers. He stresses the need to safeguard election integrity by regulating markets tied to political outcomes, especially given the rise of unregulated platforms that have operated for years without oversight.
This push follows a ruling by Judge Jia M. Cobb from the U.S. District Court for the District of Columbia, which determined that the CFTC overstepped its authority by blocking Kalshi’s attempt to offer election contracts. The CFTC has expressed concern that allowing such contracts could undermine public confidence in election results and has since appealed the decision.
Torres emphasized the importance of prioritizing resources toward regulated entities to prevent unregulated markets from gaining traction. He urged the CFTC to focus on consumer protection and election integrity, rather than continuing costly legal battles.
CFTC’s Concerns Over Political Event Contracts CFTC Chair Behnam has been vocal about the rapid growth of event markets since 2021, with concerns about the expanding size of these contracts. Earlier this year, the CFTC proposed new rules to prohibit bets on political events, citing fears of election fraud and manipulation. The proposed regulations are part of an ongoing effort to limit the influence of these markets as the 2024 U.S. elections approach.
Kalshi’s Legal Battle and Pause on Election Contracts Kalshi, which operates as a regulated event market, was forced to pause its election-related contracts after the appeals court’s stay. The legal dispute centers around whether election outcome contracts should be classified as “gaming” or “unlawful activity.” While Kalshi argues that their contracts do not constitute illegal betting, the CFTC has maintained that regulating election markets is necessary to minimize potential public harm.
The CFTC has until Saturday evening to respond to Kalshi’s legal defense, while the appeals court is expected to make a final decision on the fate of these contracts in the coming days. Meanwhile, the CFTC is working on broader regulations to ban political prediction markets altogether due to concerns about election security and fraud.
