Report: US regulator set to double down on political betting expulsion

The US Commodity Futures Trading Commission (CTFC) has reportedly dismissed overtures made by exchange betting and trading operator Kalshi to offer betting on US congressional elections.

According to a report featured on Bloomberg, the CTFC will recommend that Kalshi be denied permission to operate in the US, following an extensive review by commission staff.

While the final decision rests with the CTFC’s commissioners, the publication suggests that in line with previous decisions made, a rejection will be confirmed by the regulator.

In its application, Kalshi asked to offer markets on which political party would control both chambers of the US legislature (ie the House and Senate) after the elections, which take place on November 7.

Markets already offered by the site include events such as publication of unemployment and transportation data as well as things including weather disasters.

These events come in the form of contracts for various positions, with positions which are correct paid out at $1 per share.

Traders are able to buy and sell positions, allowing them to potentially mitigate any losses or inversely cash out profits before market closure.

The CTFC is currently in a mandatory 30-day public commenting period on the application, which was due to end on Friday, however, to date, no announcement has been made by the regulator as to the status of the case.

The report comes amid the backdrop of increased scrutiny of political betting, as the CTFC is currently being sued by fellow operator PredictIt.

PredictIt operated on a prior CTFC permission first given in 2014 which has been allocated to the Victoria University of Wellington, New Zealand, with all betting supposed to take place on a non-profit basis purely for research purposes.

In August, the CTFC revoked the so-called ‘no-action’ letter, which was its assurance that proscriptive actions would be taken against PredictIt as long as it maintained these standards.

PredictIt was ordered to liquidate all of its existing political markets by February 15, 2023, markets which include betting on the 2024 US presidential election.

Earlier this month, the site’s owners filed a motion in the US District Court for the Western District of Texas seeking an injunction to postpone this market closure based on consequences to its existing markets.

In addition to the motion to suspend, PredictIt’s backers, parent company Aristotle International Inc, have asked for the ability to add contracts to existing markets which were in place at the time of the CTFC order on August 4.

This would cover the inclusion of contracts for political candidates who have recently come to prominence in existing political markets offered on the site.

According to information provided in support of the motion, 75 existing markets would not expire by the CTFC deadline date, with more than 14,500 so-called ‘traders’ operating contracts in markets affected.

The CTFC has filed a motion to dismiss the PredictIt lawsuit against these consequences.

“No-action letters are informal, staff-level statements that the issuing staff, as an exercise of their discretion, will refrain from recommending that the Commission take an enforcement action so long as certain conditions are met,” the CFTC said in its motion.

“Under CFTC regulations, a no-action letter does not bind the Commission or any staff division but the one that issues it, and the Commission itself does not vote on or issue them.

“By their very terms, no-action letters (and letters withdrawing them) carry no legal consequences for their beneficiaries or anyone else, and that is what the University chose,” the regulator added.