CFTC Considers Banning Derivative Betting on Sports and Elections

Ahead of the presidential elections in the United States, a financial regulator has moved closer to implementing a ban on derivatives for betting on political contests and sports. Although it remains unclear if the ban would be implemented in time or if at all, in case this happens, bettors looking to place wagers on the upcoming elections may not be able to do so.

The move came from the Commodity Futures Trading Commission (CFTC), the independent US government agency that investigates and prosecutes commodities fraud, energy manipulation, hedge fund fraud and foreign currency schemes among other crimes. On Friday, the CFTC confirmed it issued a Notice of Proposed Rulemaking.

Per the notice, the agency seeks to specify specific events contracts that fall under the scope of the Commodity Exchange Act (CEA). Under the existing rules, the CFTC has the authority to prohibit betting derivatives and event contracts related to war, terrorism or assassination. Additionally, it can ban wagers on events “contrary to the public interest.”

Previously, the CFTC faced lawsuits from PredictIt, as well as Kalashi.

“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,“

reads a statement released by the CFTC

The Agency Plans to Define Gaming in Detail

According to the current rules, the Commission’s definition of gaming is broad. This is why the agency now seeks to define in detail “gaming.” As explained in a statement by the CFTC: “Further, the proposal defines “gaming” in detail, and the proposal lists illustrative examples of gaming 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.” The agency said that such contracts are examples of gaming that cannot be listed for trading or approved under the current proposal.

In light of the CFTC’s proposal, public comment will be collected for 60 days. Such comments must be submitted on or before July 9, 2024. After the collection concludes, the agency will be able to implement changes to its proposal. Prior to approving it, voting needs to take place.