U.S. Government Agency Proposes Banning Political Betting Exchanges

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A United States government agency has proposed amending its rules to outlaw wagering on political outcomes on controversial betting exchanges.

The Commodity Futures Trading Commission headquarters in Washington, DC. The independent government agency has proposed banning peer-to-peer online wagering exchanges involving political outcomes. (Image: CFTC)

Political betting via regulated sportsbooks — commonplace in the UK and throughout Europe — remains prohibited everywhere in the US. But wagering exchanges, which facilitate the peer-to-peer buying and selling of shares, have circumvented federal and state laws in a grey manner.

Officials at the Commodity Futures Trading Commission (CFTC) believe it’s time to crack down on such political wagering platforms to protect the integrity of the nation’s election system.

On Friday, the CTFC issued a proposal to amend its regulations to exclude political events and other markets from such wagering exchanges. The amendment proposition seeks to limit or ban event contracts involving “gaming, war, terrorism, assassination,” and any other activity that is “unlawful under any federal or state law.”

Political Betting Markets

Political betting markets have petitioned the CTFC that their event contracts provide valuable insights into races and can serve as educational resources. The CTFC in 2014 issued a leading political betting exchange a “No-Action Relief” letter that assured the platform that it wouldn’t face legal consequences for allowing US-based customers to place wagers on political outcomes.

The CTFC in August 2022 announced its intentions to withdraw the concession, which prompted a legal challenge in federal court. CTFC officials say they’ve seen a significant uptick in political wagering operations since sports betting expanded rapidly following the Supreme Court’s May 2018 landmark decision.

The Commission has recently observed an increase in the number and variety of event contracts listed for trading by CFTC-registered exchanges. In addition, the Commission has recently received applications for exchange registration, and expressions of interest regarding registration, from entities indicating that they are interested in listing event contracts for trading,” the proposal on event contracts read.

The recommended CTFC change to its event contract regulations goes on to clearly define “gaming” for the first time in the agency’s history, which dates back to 1975. If the amendment is adopted, the CTFC would prohibit all wagering contracts that include “staking or risking something of value on the outcome of a political contest, an awards contest, or a game in which one or more athletes compete, or an occurrence or non-occurrence in connection with such a contest or game.”

“Event contracts involving these illustrative examples of gaming could not be listed for trading or accepted for clearing under the proposal,” the CTFC statement explained.

Public Input

The CTFC says it’s fielding public comments on the proposed event contracts’ regulatory change from now until July 9, 2024. Comments will be made public on the CFTC’s website after review by the agency.

CTFC Chair Rostin Benham, who was appointed by President Donald Trump in July 2017 to the role and renominated by President Joe Biden in 2021, says banning political event contracts is crucial in allowing the agency to focus on why it was founded — to regulate derivative markets including futures, swaps, and options.

“Allowing these contracts would push the CFTC, a financial market regulator, into a position far beyond its Congressional mandate and expertise,” Behnam stated. “To be blunt, such contracts would put the CFTC in the role of an election cop.”

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