CFTC Commissioners Argue Pros and Cons of Prediction Market Trading

U.S. Commodity Futures Trading Commission (CFTC) commissioners published their views on banning predictive contract betting. The CFTC commissioners voted in favor of the ban by a 3-2 margin. The vote sets the stage for a 60-day public comment period followed by a final vote.

What’s at stake?

The majority position at the moment is that betting on the outcome of political activity is "contrary to the public interest", and can be seen on the same level as betting on assassinations, terrorism, and wars. However, the proposed ruling also goes as far as forbidding betting on the outcome of games and awards ceremonies such as the Oscars is also covered in the ruling.

Chairman Rostin Behnam, writing on the majority side, defined just what was up for consideration in his comments published on the CFTC website:

‘The proposal defines “gaming” and provides illustrative examples of gaming, including the outcome of a political contest, the outcome of an awards contest, the outcome of a game in which one or more athletes compete, or an occurrence or non-occurrence in connection with such a contest or game.’

Benham also notes that the CFTC allowing bets on political outcomes would essentially put it in the role of an “election cop”, which is far beyond the commission’s remit. He calls upon the commission to further define what is a regulated contract and what is not.

The votes ’nay’

Commissioner Caroline D. Pham claimed that the CFTC had no business regulating in the first place. States’ rights take precedent. She recommended bringing in the Government Accounting Office, as an independent review of the situation might bring some clarity. Furthermore, she stated that the commission should bring in more staff if the load was too high or too intricate to handle at contemporary work levels.

Lastly, Pham delineated sections for the upcoming question period She stated that she added sections such as the delegation of authority in the commission, missing comment letters, and Misplaced Election Integrity Concerns.

She concludes with: “The contracts causing so much consternation for the Commission have not been, and are not, gaming. If the Commission could accept that and move on, we could have a healthy discussion over how to effectively regulate these markets as we do any other and protect against abusive trading in retail binary options contracts. Instead, we have muddled it and made a mess.”