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September 26, 2022

The CFTC Should Protect Democracy, Markets, and Investors by Rejecting Request to Allow Gambling on Elections

WASHINGTON, D.C.—Dennis M. Kelleher, Co-founder, President and CEO, released the following statement in connection with Better Markets’ comment letter filed with the Commodities Futures Trading Commission (“CFTC”) regarding a request for approval of a proposed gaming contract.

“KalshiEX, LLC (‘Kalshi’) has asked the CFTC to allow traders to gamble on the outcome of congressional elections through a new so-called event contract relating to the partisan control of Congress. Based on the law, public policy, and the facts, the CFTC should reject this request and protect democracy, markets, and investors.

“The law expressly prohibits ‘gaming’ contracts like the one proposed and, therefore, the CFTC should reject Kalshi’s request.  The law also requires the CFTC to reject contracts that are illegal under state law and more than a dozen states protect the integrity of elections by outlawing gambling on elections.

“The proposal should also be rejected as against public policy.  Democracy and elections are foundational principles for the country and are not appropriate subjects for gambling and betting.  Just as we would not allow traders to place bets on when or where they believe the next school shooting will occur, so too must we protect our elections by refusing to allow gambling on our democratic process. Also, gambling on elections would be susceptible to manipulation and could incentivize people to engage in improper if not illegal conduct that could raise concerns about the integrity of the electoral process.

“The proposed contract is also another example in the deeply troubling trend toward the ‘gamification’ and ‘retailization’ of finance. In this increasingly common pattern, everyday investors are lured into new financial products and services, justified by claims that the offerings represent beneficial ‘democratization’ and ‘innovation.’ Yet as we have seen with the gamification of retail trading that fueled the meme stock frenzy, and even more so in the market for cryptocurrencies, the result is typically massive wealth for a few sponsors and issuers and massive losses suffered by the majority of retail investors.

“Finally, in addition to violating the law and being contrary to public policy, Kalshi’s submission is grossly deficient in terms of providing sufficient information and data to evaluate its claims.  This makes it impossible for the CFTC or the public to fully understand, evaluate, or comment on the submission.  This is an independent reason requiring the CFTC to reject the request.”

You can find the full public comment letter 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.

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