A lot of money was wagered on the makeup of the 119th United States Congress, and some of those newly elected and reelected lawmakers may be very interested in the legality and regulation of all that wagering even now that the voting has ended.
More than a dozen Republican members of the House who wrote to the Commodity Futures Trading Commission this summer about proposed rules for event contracts were reelected on Nov. 5.
Also reelected were Democratic Senators Elizabeth Warren of Massachusetts and Amy Klobuchar of Minnesota, who likewise wrote to the CFTC’s chairman this summer regarding event contracts. However, in their case, the letters were to raise concerns about election betting.
Full sweep for Republicans now up to a 95% chance pic.twitter.com/X4YgfdyFwX
— Kalshi (@Kalshi) November 6, 2024
Those reelections, in addition to any other interested parties who are joining the new Congress, could mean the CFTC’s next steps in regulating election betting are closely watched.
The CFTC is fighting in court to prohibit Kalshi and others from offering election-related event contracts but has lost so far.
This legal cover allowed prediction markets to take a lot of bets on the Nov. 5 election. For example, trading volume for Kalshi's "Who will win the Presidential Election?" market was nearly $460 million as of Thursday afternoon.
However, the CFTC also proposed a rule in May that would ban election-related contracts at regulated exchanges.
It was this proposal that prompted the letter to the regulator from some GOP House members, such as South Dakota Rep. Dusty Johnson and Arkansas Rep. French Hill.
Among other things, these now mostly reelected lawmakers warned the CFTC's proposal was "a reinterpretation of longstanding statutory text" that could have "a broad impact" for the derivatives industry.
“The proposal comes during a significant increase in new event contract product offerings, many of which could be impacted by the proposed rule,” the 16 representatives wrote in a letter to CFTC Chairman Rostin Behnam on July 3. “On matters of complexity and consequence such as this proposed rule, the Commission should have the benefit of a robust public discussion, and a diverse and full record.”
The CFTC has yet to oblige those members of the House, although it did extend the public comment period for its notice of proposed rulemaking through Aug. 8. The regulator has not yet finalized its proposed rule either.
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Nevertheless, given the boom in election betting this fall, it seems possible the topic could generate some discussion among lawmakers and regulators before voters head back to the polls. There are already U.S. election odds up for the 2028 presidential race.
Moreover, the reelection of most of the concerned parties could mean that they remain concerned, and interested, when the new Congress is sworn in next year.
“Betting on election outcomes can incentivize those with financial or political interests to interfere with elections and poses risks to public confidence in our democracy,” Klobuchar wrote in her letter to the CFTC in July.
Also returning to Washington are Democratic Senators Jeff Merkley, Richard Blumenthal, Chris Van Hollen, and Sheldon Whitehouse. So, too, are Democratic Representatives Eleanor Holmes Norton, and Jamie Raskin.
Alongside Warren, the lawmakers spoke out in the summer and urged Behnam to finalize the rule and prohibit political betting markets they feared could "influence and interfere" with democracy.
“Political bets change the motivations behind each vote, replacing political convictions with financial calculations,” the lawmakers wrote in a letter. “Allowing billionaires to wager extraordinary bets while simultaneously contributing to a specific candidate or party, and political insiders to bet on elections using non-public information, will further degrade public trust in the electoral process."
Not everyone agrees
But the Democrats are not the only ones with an opinion on election betting. Three Republican senators also wrote to Behnam to voice concerns about the regulator potentially limiting "the use of a critical investment tool."
“Elections have tangible impacts on markets and the businesses of derivatives markets users, and political event contracts can serve as a valuable tool to protect against these risks," wrote Iowa's Chuck Grassley, Kansas' Roger Marshall, and Mississippi's Cindy Hyde-Smith in a May 10 letter. “These markets also provide valuable data on trends in the sentiment of the voting public with legitimate public and academic utility. Other emerging asset classes, such as sports-related interests, have expressed needs for similar risk management products, and your rulemaking would seemingly prejudge the validity of those products as well.”
Like their GOP colleagues in the House, the three Republican senators asked the CFTC to consider a public hearing on its proposal, noting ongoing litigation that the regulator could influence.
The senators added that American investors have “demonstrated a clear desire to participate in these markets” – which was more than proven this election – and that it is preferable they do so using platforms under U.S. oversight.
“The CFTC prohibiting the use of these markets in the U.S. will only serve to drive American investors to participate in offshore markets where they are left with inadequate safeguards,” they warned.
