A top Wall Street regulator has proposed outlawing election betting in the U.S. derivatives markets, warning that the activity poses a threat to the sanctity of American elections. The Commodity Futures Trading Commission (CFTC) voted 3-2 to issue a new rule proposal that would ban so-called event contracts that effectively act as bets on political elections. This plan also extends to sporting events and awards ceremonies like the Oscars.

Regulatory Decision

For over a decade, the CFTC has rejected applications to offer day traders, political junkies, and sophisticated investors the chance to bet on elections. This recent move is the strongest yet, signaling that election betting has no place in its markets. As the CFTC representative stated, “Contracts involving political events ultimately commoditize and degrade the integrity of the uniquely American experience of participating in the democratic electoral process.”

Political Election Betting – Market Reactions

The proposal has split opinions within the CFTC itself, with a narrow 3-2 vote reflecting the contentious nature of the issue.The debate over the future of political betting markets in the U.S. has intensified, with platforms like PredictIt and Kalshi challenging the CFTC’s decisions through lawsuits.

Industry Implications

Event contracts are designed to allow investors to hedge against a range of outcomes, from geopolitical risks to economic changes. With the growing interest in these products, the CFTC’s proposal could push event contract markets offshore, away from U.S. regulatory oversight, as companies seek more favorable conditions elsewhere.

The View from Europe

While the CFTC’s proposed ban targets U.S. markets, it serves as a crucial reminder for betting operators in EU to maintain robust regulatory standards and ethical practices. Our association will continue to monitor these developments closely to ensure our members are informed and compliant with best practices globally.

Back in 2011, DOJ issued an official interpretation that Wire Act provisions, banning the interstate data transmission for sports betting wagering, applied only to online sports betting. The then legal opinion has been favourable to US online lottery and casino operators.

However, there are firm indications that DOJ considers reviewing this official position. Given the discussion on this number one legal topic post-PASPA gets re-intensified, there is a broad line of potential negative implications to the existing intra-state US sports betting market, quickly transforming since May 2018.

If adopted, this re-interpretation may bring additional regulatory uncertainty in US sports betting market. The first severe implication would be that banks once again ban gambling-related transactions and declare them illicit.

As US Attorney general left his office this November, it remains to be seen whether this policy proposal came from himself or his acting replacement.