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CFTC warns election betting boom could harm public interest

GrafaGrafa2024/09/16 03:40
By:Liezl Gambe

The United States Commodity Futures Trading Commission (CFTC) has raised concerns about the potential risks of prediction markets, warning that they could be subject to "spectacular manipulation." 

The CFTC's latest statement comes amid its legal battle with US prediction market Kalshi. 

The regulator cited past incidents of manipulation on similar platforms to support its stance against Kalshi’s election betting services.

In a filing on September 14, the CFTC highlighted instances of manipulation in prediction markets. 

The regulator pointed to a case involving Polymarket, where a group of traders allegedly attempted to manipulate the market by betting on Vice President Kamala Harris to win the 2024 US presidential election. 

Another example involved PredictIt, where a fake poll showed Kid Rock leading Senator Debbie Stabenow in a senate race, causing fluctuations in the contract prices related to Stabenow's re-election.

Kalshi’s founder, Tarek Mansour, claimed a partial victory for the platform on September 9 after the District Court allowed Kalshi to offer election betting. 

However, the CFTC quickly filed an emergency motion, leading District Court Judge Jia Cobb to issue a temporary stay order on September 9 to pause Kalshi's election markets. 

The US appeals court later extended this stay.

Despite this, Mansour mentioned that Kalshi briefly launched its first election market on September 12, but it was taken down hours later due to the appeals court's order. 

The CFTC continues to push back, arguing that allowing election betting could cause more harm than any financial losses Kalshi might suffer. 

“A pharmacy does not get to dispense cocaine just because it is sold on the black market,” the CFTC stated, emphasising the potential dangers of unchecked election betting.

The core issue in the CFTC's case against Kalshi is whether the platform’s operations qualify as “gaming” under US law, thereby falling under the regulator's jurisdiction. 

Judge Cobb's earlier ruling on September 6 indicated that the CFTC may have "exceeded its statutory authority" in ordering Kalshi to stop its election markets.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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