WASHINGTON, D.C.— Dennis Kelleher, Co-founder, President, and CEO, issued the following statement in connection with the Commodities Futures Trading Commission (“CFTC”) Order to reject KalshiEX, LLC’s (Kalshi) self-certified political control event contract:
“The CFTC’s well-grounded, thoughtful, 23-page Order to reject Kalshi’s backdoor attempt to unleash gambling on U.S. elections through so-called event contracts was the right one. As the CFTC Order, the Chair Behnam’s statement, and most of the 1,378 public comments make clear, Kalshi’s proposal violates numerous provisions of the Commodities Exchange Act. Moreover, at a time when there are already historically high concerns about the integrity of our elections, the CFTC properly evaluated the multiple fatal flaws in Kalshi’s self-certified contract and decided that it was a clear violation of public policy as well.
“Derivatives markets overseen and regulated by the CFTC exist to help commercial enterprises (physical producers and purchasers of products) protect themselves from financial risks and determine fair prices for what they buy and sell. While limited speculation is allowed to facilitate that trading among the commercial enterprises, these markets are not intended or designed to be casinos for wild speculation-only bets. The markets are supposed to support the people and businesses who actually make, sell, and buy things. That’s why the law places limits on how much people can speculate, or gamble, in those markets. The CFTC is mandated to ensure that the markets do not suffer from excess speculation, which disrupts markets, harms producers and purchasers, and is decidedly detrimental to consumers. Kalshi’s proposal was unquestionably inconsistent with those mandates and objectives.
“With at least hundreds of millions and more likely billions of dollars being bet and with the rise of low-cost social media and artificial intelligence, allowing betting on U.S. elections would almost certainly lead to election interference, abuses, and other illegal conduct. Gamblers will almost certainly try to influence political outcomes to ensure winning bets, as is increasingly seen with gambler interference in other activities. Even a small amount of money spent on negative ads can have a big impact on close races, local elections, and primaries with low voter turnout, especially if these ads are shown right before an election when there’s no time for an opponent to respond. Incentivizing election interference is that last thing this country needs right now.
“Democracy and elections are foundational principles for the country and are not appropriate subjects for gambling and betting. Many Americans have protested, suffered, and died in hopes that they and their descendants can take part in the fundamental democratic process of voting. While currently under attack, free and fair elections in America are sacred. Gambling on those elections goes against this public interest and the CFTC’s decision upholding those principles is well grounded.
“Regrettably, none of that is likely to matter to Kalshi and its many Wall Street and Silicon Valley supporters, who see big profits in gambling and rampant speculation. Worse, the increasing number of courts and judges biased against the government and favoring financial firms have incentivized questionable if not baseless lawsuits, and such a forum-shopping lawsuit is virtually guaranteed here. We look forward to supporting the CFTC in court if necessary.”
You can find Better Markets’ comment letter on Kalshi’s proposal here. You can find the letter from Senators opposing this proposal here and the letter from Congressmen here. The joint letter from hundreds of organizations and concerned citizens opposing the proposal is here.
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.