Feds Consider Whether to Allow Betting on Election Outcomes
Monday, August 28, 2023
A proposal to allow betting on which political party will control Congress is drawing opposition from pro-democracy groups and from a coalition of progressive senators.
The New York trading company Kalshi has asked the Commodity Futures Trading Commission for approval to offer derivatives trading on so-called "event contracts," specifically, on control of Congress.
Stephen Spaulding, vice president of policy for the nonprofit Common Cause, said gambling on elections is bad for democracy.
"You can imagine wealthy gamblers could make significant money by exploiting disinformation to influence an electoral outcome that would protect the bettors' bottom line," Spaulding pointed out. "This again opens up a significant risk to the perception that the winners and losers of an election are not determined by voters, but by those who stand to gain financially."
Backers of the proposal say it would allow companies to hedge against certain outcomes, limiting risk. Eliezer Mishory, Kalshi's chief regulatory officer, has argued betting on elections is already allowed overseas, and suggests this proposal would give the federal government oversight powers.
Spaulding noted the "Citizens United" Supreme Court decision allowed companies to spend unlimited money on elections, and called betting on elections a "profound threat to democracy."
"You can imagine a situation where an entity places an enormous wager on the outcome of an election, and also funnels resources through Super PACs or other 'dark money' vehicles to influence the outcome of an election," Spaulding explained. "That is inherently, we think, anti-democratic."
Both Common Cause and some U.S. senators, including California's Dianne Feinstein, submitted letters of opposition during the public comment period, which ended in July. The Commodity Futures Trading Commission is expected to make a decision by Sept. 21.
Support for this reporting was provided by The Carnegie Corporation of New York.
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