A group of Democratic lawmakers wants to keep big money groups from placing big election bets, urging a federal regulator to follow through with a proposed ban on de facto political wagering.
U.S. Senators Jeff Merkley, Richard Blumenthal, Chris Van Hollen, Elizabeth Warren, and Sheldon Whitehouse, along with Representatives Eleanor Holmes Norton, Jamie Raskin, and John Sarbanes sent a letter on Monday seeking the election betting ban.
The Democratic lawmakers asked the chairman of the Commodity Futures Trading Commission (CFTC) to finalize and implement a proposed rule that would prohibit trading in contracts involving “gaming,” a definition that would include political contests and sporting events.
“Election gambling fundamentally cheapens the sanctity of our democratic process,” the Democrats said in their letter. “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.”
The Democrats indeed seem less worried about recreational bettors having a flutter on who they think will win in November than the financial types who could throw serious sums of money around on political contracts. Nevertheless, the CFTC’s proposal would stifle election wagering both big and small through regulated exchanges, restricting the already-restricted avenues of such betting in the U.S.
States that have legalized and regulated sports betting do not permit election betting through those same sportsbooks. That leaves offshore and unregulated options, as well as experimental markets offered by PredictIt and the Iowa Electronic Markets, where users can buy and sell election-related contracts.
The CFTC is still taking comments from the public on the proposed rule and will do so until Thursday. The regulator has already received more than 400 submissions from interested parties, including at least one other Democratic lawmaker, Minnesota Sen. Amy Klobuchar, who appears to favor a ban on election contract trading.
“Betting on election outcomes can incentivize those with financial or political interests to interfere with elections and poses risks to public confidence in our democracy,” Klobuchar wrote in a July 8 letter to CFTC Chairman Rostin Behnam. “Notably the Commission has previously rejected proposals to create political betting markets because of the potential negative impact that such bets could have on the integrity of our elections, including declining to approve one proposal to permit betting or wagering on elections just last year.”
On the other hand...
The CFTC has heard from supporters of election betting through regulated exchanges, such as a representative of Nasdaq Inc., who said the stock-exchange operator believes political event contracts (PEC) are not gambling.
In addition to acting as a "valuable source of information" for politicians, journalists, and the public, the regulation of those contracts would allow for safeguards to be put in place to prevent manipulation, such as limits on the size of a bettors' position, the Nasdaq rep suggested.
“We believe that regulating event contracts, especially PECs, will bring many benefits to the marketplace and the political discourse in the United States,” Nasdaq’s Kevin Kennedy wrote in an Aug. 2 letter. “Regulation will provide legal certainty and legitimacy to PEC markets and platforms, which will encourage innovation and competition. Regulation will also enhance transparency and accountability, which will reduce fraud, manipulation, and abuse.”
Minnesota Gov. Tim Walz was a 33/1 underdog to be Kamala Harris' VP candidate as recently as July 23. Those odds shortened to -300 this morning, and news broke shortly after that Walz was the pick. pic.twitter.com/ZddrfmyQue
— Geoff Zochodne (@GeoffZochodne) August 6, 2024
Whatever the CFTC’s final decision, the interest in regulating de facto election betting through exchanges also comes as there is sizable interest in election betting overall. That follows a historic July in which President Joe Biden decided against running for reelection and an attempt on the life of former president Donald Trump. The latter event prompted some regulated sportsbooks in Ontario to shutter their election betting markets, suggesting some skittishness about political wagering exists even where it's legal.
Still, last month's events have shifted U.S. election odds and influenced related betting markets, such as who Vice President Kamala Harris would choose for her own VP candidate after having already cruised to the Democratic presidential nomination herself. On Tuesday, Harris officially selected Minnesota Gov. Tim Walz as her running mate, a candidate who was a double-digit underdog for the post only weeks ago.
On PredictIt, millions of contracts regarding the Democratic VP candidate were bought and sold in the run-up to Tuesday's announcement, suggesting lots of bettor interest in the outcome. That interest was also via a predictions market still considered experimental and that limits the amount of action its users can have on any given market.
“PECs have been traded on various platforms, such as PredictIt, Iowa Electronic Markets, and Betfair, for many years, and have attracted significant attention and participation from the public,” Kennedy noted. “PECs can offer a useful tool in analyzing elections and other political phenomena, as they can complement traditional sources of information, such as polls, surveys, and expert opinions.”
