CFTC Proposes Regulatory Crackdown on Political Betting in the US
The Commodity Futures Trading Commission (CFTC) is taking steps to tighten regulations on political betting platforms in the United States.
On Friday, the CFTC issued a proposal to amend its regulations to specifically exclude political events and other sensitive markets from wagering exchanges.
Background of Political Betting in the US
Political betting, though common in the UK and other parts of Europe, is prohibited across the US within regulated sportsbooks.
However, the emergence of wagering exchanges that facilitate peer-to-peer trading has created a grey area in federal and state laws.
The CFTC’s proposed amendment would limit or outright ban event contracts involving not only political events but also those related to “gaming, war, terrorism, assassination,” or any activity deemed “unlawful under any federal or state law.”
Historical Context and Legal Challenges
In 2014, the CFTC granted a “No-Action Relief” letter to a leading political betting exchange, assuring the platform that it would not face legal consequences for allowing US-based customers to engage in political betting.
However, with the expansion of sports betting following the Supreme Court’s landmark decision in May 2018, the CFTC has observed an increase in political wagering operations.
This prompted the agency in August 2022 to announce its intention to withdraw this concession, leading to a legal challenge in federal court.
CFTC’s Rationale for the Amendment
The CFTC’s proposal aims to clearly define “gaming” for the first time since the agency’s establishment in 1975. Under the proposed changes, any wagering contracts that stake something of value on the outcome of a political contest or any associated event would be prohibited. This includes a wide range of potential contracts, from political races to awards contests and sporting events.
The CFTC is currently soliciting public comments on the proposed changes until July 9, 2024. All comments will be made publicly available on the CFTC’s website following a review. CFTC Chair Rostin Behnam, appointed by President Donald Trump and renominated by President Joe Biden, emphasized the importance of the amendment. He stated that allowing these contracts would extend the CFTC’s role “far beyond its Congressional mandate and expertise,” potentially positioning it as an “election cop.”
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