Better Markets filed a comment letter with the Commodities Futures Trading Commission (“CFTC”) regarding KalshiEX, LLC’s (Kalshi) self-certified political control event contract.
Why It Matters. The CFTC has nothing to do with U.S. elections, but a private company is nonetheless claiming that it can legalize gambling on U.S. elections via a so-called ‘event contract’ with bets of up to $100 million depending on the type of gambler. However, the regulations governing the CFTC expressly prohibits contracts involving, related or similar to ‘gaming’ as well as those that are illegal under state or federal law. Given that gambling involves, relates to and is similar to gaming and that more than a dozen states outlawing gambling on elections, the CFTC must reject this sneaky backdoor attempt to unleash gambling on U.S. elections.
What We Said. The CFTC’s mission is to regulate derivatives and commodities, such as wheat, oil, gas, soybeans, and cattle, which are of utmost importance to all Americans. By effectively overseeing and monitoring these markets, the agency ensures that these essential commodities are made available to the American people in the right quantities, at the right times, and at prices that reasonably reflect supply and demand. That is critical for everyday items like breakfast cereals, lunch sandwiches, as well as the fuel needed for transportation to school, work, and the grocery store.
The CFTC has nothing to do with gaming, gambling, or elections, which is why it has no experience, expertise, or mandate to legalize, authorize or police gambling on elections across the U.S. (or to overrule the state and federal laws regulating gaming and gambling not to mention elections). Given the importance of the mission of the CFTC to the daily lives of all Americans, the agency should not take on responsibilities far beyond its mandate and expertise which will inevitably impair its ability to fulfill its vital role.
Moreover, given the increasing use and abuse of social media in the gambling space and the A.I. in the political space, allowing gambling on U.S. elections will invite if not incentivize more interference, abuse, and misconduct as gamblers seek to effect political outcomes to maximize their winnings. Even relatively small spending on negative attack ads can help swing a close race, local elections, and primaries with low turnout, especially if done in the last few days before an election when there is little if any time for a meaningful response. With hundreds of millions if not billions of dollars being bet, it is inevitable that some gamblers will spend a few million dollars or more to interfere with elections to put themselves in the money.
Bottom Line. The important markets regulated by the CFTC were not established to be a casino but to facilitate the provision of essential goods to Americans by enabling commercial entities to manage the price risk associated with their productive commercial activities. Kalshi’s event contract will serve none of these critical functions. Indeed, just the opposite: it will pose serious threats to investors, markets, and our democracy.
Read the letter here or click the button below.