CFTC Commissioner Says Election Prediction Markets ‘Are Here to Stay’

The Commodity Futures Trading Commission (CFTC) will be taking a new, friendlier look at election prediction markets, one of its members told a Federalist Society panel on Cryptocurrency After the Election.

“I think election prediction markets are here to stay,” CFTC Commissioner Summer Mersinger said on Feb. 11. “So the agency has to take a different approach.”

Former CFTC Chairman Rostin Behnam sued to stop prediction market Kalshi from offering election contracts, saying that if someone put out fake news about a political race to move the odds on an election contract, the CFTC would have to investigate it as fraud or price manipulation. That, Benham said, would put the agency in the untenable position of policing elections.

So, the agency sued Kalshi to stop it from offering such contracts but lost in court. It is still appealing that ruling at this time.

But by calling it gambling, Mersinger said, the agency tried to take a quicker path to “no” than proper rulemaking.

“The idea that we can unilaterally say no by calling everything gaming, those days are over,” she said. “We have to be a little more pro-innovator and understand that something might look different from what we know or what we are used to, but different isn't bad.”

As for the concerns about election manipulation, she said that the contracts have safeguards built in to protect against that.

Controversial Bets

Prediction markets like Kalshi and Polymarket have proven more accurate than conventional polling in some elections, including the 2024 presidential race, something they attribute to the need for participants to put real money behind their opinions.

Polymarket caught the attention of regulators and the press after one French participant won $80 million betting on Donald Trump to win the presidential race. Its internal probe found no wrongdoing, but the French gambling authorities scrutinized the situation to the point where Polymarket blocked French users.

“I think we have to carefully look at these contracts as they come online,” Mersinger said. But, she added, “there are utilities for these markets, and we need to appreciate that and move forward with that in mind.”