Posted on: August 6, 2024, 08:14h.
Last updated on: August 6, 2024, 08:14h.
A handful of Democratic United States senators led by Sen. Jeff Merkley (D-Oregon) is calling on a federal government agency that regulates derivative markets to adopt a proposed rule that would forbid political wagering exchanges.
The Commodity Futures Trading Commission (CFTC) in May proposed amending its regulations to prohibit peer-to-peer wagering contracts involving “gaming, war, terrorism, assassination” and any activity that is “unlawful under any federal or state law.” The proposal specifically seeks to ban political wagering exchanges that facilitate the buying and selling of political outcome shares from operating within the U.S.
The handful of Democratic senators, plus three Democratic U.S. representatives, support the CFTC proposal.
Election gambling fundamentally cheapens the sanctity of our democratic process,” the congressional lawmakers wrote CFTC Chair Rostin Behnam. “Political bets change the motivations behind each vote, replacing political convictions with financial calculations.”
Along with Merkley, the letter asking the CFTC to exclude political contract wagering includes Sens. Richard Blumenthal (D-Connecticut), Chris Van Hollen (D-Maryland), Elizabeth Warren (D-Massachusetts), and Sheldon Whitehouse (D-Rhode Island). U.S. Reps. Eleanor Holmes Norton (D-Washington, D.C.), Jamie Raskin (D-Maryland), and John Sarbanes (D-Maryland) were also cosigners.
No legal sports betting state allows oddsmakers to offer traditional betting on election outcomes. So, you won’t find 2024 presidential odds at DraftKings, FanDuel, or any other regulated sportsbook. Online political wagering exchanges instead allow bettors to gamble with one another.
Data, Educational Insights
The CFTC in the past has granted political wagering exchanges “No-Action Relief letters suggesting that such online platforms would not face legal consequences from federal prosecutors.
The CFTC reasoned that such political wagering provides valuable insights into races that traditional polling cannot. Markets usually limit how much a bettor can wager on each outcome.
Since becoming CFTC chair in 2021, Behnam has expressed concerns about election gambling. In his May rule change proposal, Behnam said election wagering degrades “the uniquely American experience” of participating in the democratic electoral process.
Merkley and his supporters agree. They say such gambling further lessens the public’s trust in the political system.
“Allowing billionaires to wager extraordinary bets while simultaneously contributing to a specific candidate or party, and political insiders to bet on elections using non-public information, will further degrade public trust in the electoral process. We urge you to promptly finalize and implement this rule to prevent the commodification of U.S. elections,” the lawmakers wrote.
Mixed Feedback
The CFTC held a public comment period that expired July 9. In the comments posted to the CFTC website, it’s clear that the election wagering issue is contentious.
Several comments from CFTC commissioners questioned the federal agency’s powers and whether the proposed election wagering rule violates the U.S. Constitution.
I respectfully dissent from the Event Contracts Proposal because it takes the CFTC’s regulation of event contract markets backwards with its fundamental misunderstanding of how we regulate derivatives and the States regulate gaming,” wrote CFTC Commissioner Caroline Pham. “Instead of thoughtfully considering how to effectively regulate these markets while fostering innovation, the Event Contracts Proposal ties itself in knots over the bounds of gaming, which Congress has neither asked nor directed the CFTC to regulate.”
Pham cited the Tenth Amendment and the Founders’ directive that powers not delegated to the federal government through the U.S. Constitution be reserved to the states. CFTC Commissioner Summer Mersinger also dissented on grounds that a blanket ban on contract wagering could potentially prohibit “exchange-traded event contract whose terms and conditions the Commission has never even seen.”
Commissioners Kristin Johnson and Christy Goldsmith Romero backed the Behnam proposal.
