WASHINGTON, D.C.—Dennis Kelleher, Co-founder, President and CEO of Better Markets, issued the following statement in response to the Commodity Futures Trading Commission’s (CFTC) 3-0 vote to drop its appeal in KalshiEx LLC v. CFTC:
“This would be funny if it weren’t so serious: the Commodity Futures Trading Commission’s (CFTC) – not the Federal Election Commission or state gambling authorities – has unleashed nationwide online gambling on U.S. elections via so-called ‘event contracts’ and is now responsible for supervising, regulating, and policing that gambling, even though it has zero ability, expertise, capacity, or funding to do so. All of this is the result of the CFTC’s decision on Monday to drop its appeal in the KalshiEX LLC v. CFTC case (conveniently before Kalshi Board member and Trump’s CFTC Chair nominee Brian Quintenz has to face an as yet unscheduled Senate nomination hearing).
“Opening this Pandora’s box will undermine democracy, by, among other things, creating financial incentives for election disinformation, voter suppression, and even outright manipulation and election interference. It will also result in the proliferation of gambling more broadly and distract the CFTC from its core mission of regulating and policing the multi-trillion-dollar commodity and derivatives markets. The risks to retail investors are equally dire. Fueled by artificial intelligence, gamification algorithms, and targeted ads, the number of victims is bound to skyrocket. That’s why dozens of investor, consumer, and democracy organizations and leaders – as well as members of Congress – who have participated in the CFTC process and related litigation over several years, all uniformly opposed the sneaky backdoor attempt to get the CFTC to authorize this gambling.
“The CFTC’s decision to abandon the appeal is a failure of leadership, dereliction of duty, violation of the law, and a betrayal of the public trust. It also leaves in place a seriously flawed lower court ruling that will open the flood gates to all sorts of creatively engineered financial products claiming to fit within the gaping statutory loophole the court opened. It means gambling on democracy today, but gambling on everything tomorrow, with the ineffective, underfunded, incapable CFTC ludicrously in charge.
“Adding insult to injury, the CFTC did this at the same time it is expected to be put in charge of regulating and policing the sprawling, multi-trillion-dollar crypto industry (in which Trump’s conflicted Chair nominee Quintenz is also deeply involved). As a result, it is going to be impossible for the CFTC to fulfill its current vital mission to protect the public by properly policing the derivatives markets and ensuring that key products like cereal, bread, gas, and heating oil are available to the American people at the right time, in the right quantities, and at prices based on supply and demand, not speculation.
“The CFTC took the action to abandon this case in a nonpublic meeting and offered no explanation for doing so even though the case had been pending before the federal appeals court in Washington D.C. for months, and well after both sides had fully briefed and argued it. That silence is indefensible in light of the innumerable public interest participants in the process – including several sitting members of the House and Senate – and the very high stakes involved in this matter. It is equally indefensible that Democratic Commissioner Goldsmith Romero, who previously correctly voted to block Kalshi’s election gambling contracts, secretly flipped her position and delivered the deciding vote that enabled the CFTC to abandon its appeal. If there was a legitimate, well-grounded, legal or fact-based analysis supporting a decision to abandon the meritorious appeal, and for de facto endorsing the contorted and dangerous District Court opinion, then presumably the ever-voluble Commissioner would have publicly provided it.
“While it has already been repeatedly demonstrated that the Trump Administration, its appointees, and its allies are subordinating the public interest at the financial regulatory agencies to the industries they are supposed to regulate, Democratic regulators like Commissioner Goldsmith Romero are expected to prioritize the public interest, uphold the rule of law, make decisions based on the facts and the merits, and respect the input of public interest groups. Instead, the Commissioner secretly voted with Wall Street and Silicon Valley gamblers, speculators, and financial predators over the public interest, while handing the nominated Chair’s longtime employer a huge victory and him a gift by clearing in part one of his many conflicts of interest.
“The bottom line is that the CFTC action to abandon this case was not based on any legal development but was a political decision due to the election and the welcome mat the new administration has put out for the industry. None of the legal and policy concerns that motivated the CFTC to pursue the appeal suddenly evaporated simply because a new acting chair was appointed to lead the CFTC or because the mix of presiding commissioners was altered with the departure of the former chair. The issues presented in the appeal remained critically important and should have been resolved as the CFTC originally intended: through the orderly appellate legal process. Commissioner Goldsmith Romero should not have tipped the balance and voted to cut that process short, subverting the legal process and subordinating the public interest to Kalshi’s profit maximization.”
For more information, you can find our appeal court brief here and our latest fact sheet on the case here.
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Better Markets is a non-profit, non-partisan, and independent organization founded to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.
