The latest attempt by the U.S. Commodity Futures Trading Commission to ban trading contracts on election results has drawn hundreds of comments from stakeholders, traders and other interested parties, with some wanting the federal regulatory body to refine the proposal and ensure it would not make sports betting and other forms of gaming illegal.
Betting on politics, such as November’s presidential election, is a popular market with sportsbooks in Canada and Europe. However, it is currently not allowed in any of the 38 states or the District of Columbia where sports betting is legal. That includes Massachusetts and its seven active operators, including BetMGM Massachusetts.
While Americans cannot bet on elections, they can establish accounts at PredictIt, an online exchange that offers markets on elections. In addition, the odds of former President Donald Trump and Vice President Kamala Harris winning in November have been mentioned in several news articles. Reporters also covered the changing odds during the Democratic vice presidential candidate selection process.
Thursday was the deadline for the public to comment on the proposal. As of Thursday evening, the CFTC website listed more than 800 comments received. However, there were several duplicate or blank entries. The commission also received comments from several lawmakers on both sides of the issue. Among them was U.S. Sen. Elizabeth Warren (D-Massachusetts). She cosigned a letter with others on Capitol Hill who oppose political betting or trading becoming an option across Massachusetts sports betting.
Gaming Groups Raise Concerns
The proposed change drew the attention of both the American Gaming Association and the Sports Betting Alliance, the latter of which consists of BetMGM, DraftKings Massachusetts Sportsbook, FanDuel and Fanatics. The two industry trade groups did not express a desire to offer political betting. Instead, they want the commission to revise the proposal to guarantee it does not preclude states from permitting gaming.
Both also want the commission to give sports betting operators leeway to create a regulated market to “hedge against legitimate commercial risk,” as AGA Senior Vice President for Government Relations Christopher Cylke wrote in his letter sent on Thursday.
Alliance President Jeremy Kudon wrote that the group objects to the current proposal because it “overlooks the compelling economic purpose” that an exchange would offer.
“We strongly advocate for meaningful discussions between our members, other relevant companies within the sports wagering and sports industries, and the CFTC,” Kudon wrote. “These discussions are essential to address the complexities of the industry and ensure that any regulatory measures are well informed and balanced.”
Lawmakers Have Their Say
Warren was joined by U.S. Sens. Jeffrey Merkley (D-Oregon), Sheldon Whitehouse (D-Rhode Island), Chris Van Hollen (D-Maryland) and Richard Blumenthal (D-Connecticut) and U.S. Reps. Jamie Raskin (D-Maryland), John Sarbanes (D-Maryland) and Eleanor Norton (D-District of Columbia) in expressing support for the proposed changes to ban election trading.
They cited the rise in threats of violence and extremism and the potential for foreign actors to get involved. Barring elections futures would “restore trust” for voters, as trading on elections would only lead to more corruption.
“Election gambling fundamentally cheapens the sanctity of our democratic process,” they wrote. “Political bets change the motivations behind each vote, replacing political convictions with financial calculations. 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.”
Not all lawmakers agree. U.S. Sens. Roger Marshall (R-Kansas), Cindy Hyde-Smith (R-Mississippi) and Chuck Grassley (R-Iowa) say the federal agency established 50 years ago has championed innovation in the markets. They also argued that offering political contracts would allow those affected by an election’s outcome to protect themselves against risk.
“Furthermore, American investors have demonstrated a clear desire to participate in these markets, and it is far preferable that they do so on platforms that benefit from the oversight and protections provided by the American regulatory structure,” the trio wrote. “The CFTC prohibiting the use of these markets in the U.S. will only serve to drive American investors to participate in offshore markets where they are left with inadequate safeguards.”
Marshall, Hyde-Smith and Grassley also urged the commission to hold a public hearing to allow for more discussion on the matter.
How We Got Here
A decade ago, the CFTC permitted PredictIt creator Victoria University in New Zealand to operate a political exchange, provided it followed nine stipulations. University representatives proposed the exchange, saying it would provide valuable data to researchers in political science and other fields.
Two years ago, the commission notified university officials it was rescinding that permission because the exchange violated the “no-action letter” spelling out the conditions under which it could operate. That led to a court case with a federal appeals court ordering an injunction keeping the CFTC from revoking the letter.
In May, the CFTC approved a proposal “to further specify the types of event contracts that involve ‘gaming’” which federal law prohibits being traded like stocks. The new definition includes “the outcome of a contest,” which would include political elections, awards contests and sporting events.
Public comments were initially scheduled to be taken until July 9. However, the commission announced on June 27 that it would extend the window through Thursday to give stakeholders and interested parties more time to review the changes and consider their responses.
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USA Today photo by Mandi Wright.
