The Rostin Behnam-led CFTC proposed a new rule Friday that would ban election-betting financial products from the derivatives markets. | Francis Chung/POLITICOA top Wall Street regulator has proposed outlawing election betting in the U.S. derivatives markets, with officials warning that the activity poses a threat to the sanctity of American elections.
“Contracts involving political events ultimately commoditize and degrade the integrity of the uniquely American experience of participating in the democratic electoral process,” CFTC Chair Rostin Behnam said. “Allowing these contracts would push the CFTC, a financial market regulator, into a position far beyond its Congressional mandate and expertise. To be blunt, such contracts would put the CFTC in the role of an election cop.
John Aristotle Phillips, co-founder and CEO of PredictIt, called the proposal “ill-conceived” and “a mistake.” The products are intended to offer companies and investors a new tool to protect their businesses and portfolios from geopolitical risks, economic downturns or, in the case of election-betting contracts, policy swings, backers say. If someone with heavy exposure tois also bracing for a second Trump administration, for example, they may turn to an event contract to offset the risk of Biden losing in November.
But the CFTC has found over the years that election-betting proposals would run afoul of the law. Currently, event contracts cannot relate to certain categories including war, terrorism, assassination and gaming. They are also not allowed to run contrary to the “public interest” or be tied to activity that would violate federal or state law.
“Free and fair elections have served as a foundational cornerstone of power in Democracy and the decision-making process underlying our elections must remain sacrosanct,” she said.