One of the most influential people standing in the way of wider-spread wagering on U.S. elections is about to step aside, perhaps opening the door to even more political betting and products that look a lot like sports gambling.
U.S. Commodity Futures Trading Commission Chairman Rostin Behnam announced on Tuesday that he will be leaving the job on Jan. 20, the same day Donald Trump will again be inaugurated as president.
Behnam was appointed to his role full-time by Democratic President Joe Biden, who is soon to leave the White House.
“As Chairman, I led the agency with a focus on identifying, assessing, and addressing risks within our regulated markets,” Behnam said in a statement. “Additionally, I took actions anchored in building consensus – strictly within the bounds of the law, and towards establishing appropriate guardrails to minimize disruption, maintain a level playing field for all stakeholders, and fulfill our mission and purpose.”
Not so fast, my friend
Yet one area the CFTC commissioners were not in lockstep on had to do with event contracts, financial instruments that traders can buy and sell via exchanges the regulator oversees.
In particular, Behnam and two other commissioners supported proposed changes to explicitly prohibit event contracts connected to elections and sporting events. While two other commissioners dissented, the amendments moved forward and feedback was accepted from the public this summer.
"Contracts involving political events ultimately commoditize and degrade the integrity of the uniquely American experience of participating in the democratic electoral process," Behnam said in a statement in May. "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."
Today, I announced my departure from @CFTC. After more than seven years at the U.S. Commodity Futures Trading Commission, I will be stepping down from my position as Chairman on January 20th. My final day at the Commission will be Friday, February 7th. A 🧵
— Rostin Behnam (@CFTCbehnam) January 7, 2025
While the proposed rule changes have not been finalized, it was also under Behnam’s watch that the CFTC prohibited prediction market Kalshi from listing election-related contracts for trading. Again, that vote was not unanimous, as two of the five commissioners either dissented or abstained.
Kalshi took the regulator to court over the matter and secured a victory that allowed it to offer contracts tied to the 2024 U.S. presidential election.
Although the case is not yet settled, hundreds of millions of dollars were bet on the election on Kalshi and the prediction market is still very much in the political wagering business.
Other entities are interested in opening or expanding prediction markets as well. DraftKings is looking into opportunities for itself, and Robinhood, which offered election betting markets, is eyeing sports betting products.
A new day for election betting?
Behnam is now on his way out, removing an opponent of election betting and perhaps other types of event contracts.
His successor at the CFTC may take a more favorable approach toward de facto betting on U.S. election odds using regulated exchanges. If so, the balance of power could tilt toward the pro-betting crowd.
Behnam told the Financial Times (in an exit interview of sorts) that he has "strong concern" about contracts tied to elections, assassination, terrorism, and gaming.
“The line is going to be very blurred about what is legal, what’s illegal,” the regulator told the paper, which added that “Behnam called on his successor to bring a ‘renewed focus’ to the issue, ‘so that we have more clear-cut lines of what we view as permissible and impermissible.’”
Arguably, the lines are looking a bit blurry already. In addition to Kalshi’s growing buffet of event contracts, Crypto.com has launched a sports trading business that it calls a “CFTC-regulated derivatives product.”
🆕 US users, new championships have arrived in https://t.co/vCNztATSCO Sports
— Crypto.com (@cryptocom) January 7, 2025
Potentially Profit when you correctly predict the outcome of:
⭐ Pro Football Conference Championships
⭐ Bowl Games
⭐ College Football Championship pic.twitter.com/l4oaMZhrd7
Crypto self-certified the event contract, which it can do under existing law and regulations. Kalshi did the same with its congressional control contracts in 2023, but they were challenged shortly after by the CFTC and a review was begun that led to their prohibition. It wasn’t until a court ruled in Kalshi’s favor last year that the prediction market could allow election-related trading to resume.
(Notably, the September court ruling found that "gaming," one of the activities the CFTC is allowed to forbid for event contracts, "refers to playing games or playing games for stakes." The same ruling added that "Kalshi’s congressional control contracts do not involve unlawful activity or gaming.")
The CFTC does not appear to have challenged Crypto’s contracts. It may yet or it may never, considering Behnam’s coming departure.
“Unless we put out something publicly, such as initiating a review, we will decline to comment,” the regulator’s press office told Covers earlier this month.
Let the games begin
Crypto is already beginning to expand its sports trading business. Users can now make predictions regarding the outcome of the Super Bowl, NCAA bowl games, and the college football championship. The company’s self-certification filing suggests it could go further.
“An association's final title event not only determines which association participant is the tile (sic) holder of a given association, more importantly title events are massive commercial, entertainment and economic events that have substantial impact on businesses and individuals throughout America depending on many factors,” wrote Kevin Dan, Crypto.com | Derivatives North America's chief compliance and regulatory officer, in the Dec. 19 letter to the CFTC. “Further, such events are a culmination of a series of events throughout an association’s season.”
The Trump administration also has a good chance of being more amenable to event contract trading for other reasons, including its positive stance toward the cryptocurrency industry.
In addition, the trading done on prediction markets like Kalshi projected a higher likelihood of Trump winning the White House than some polls.
Trump supporters like Elon Musk are fans of prediction markets. Musk even suggested they were more accurate than polls “as actual money is on the line.”
