The CFTC has filed a legal challenge against the prediction platform Kalshi due to concerns about market manipulation in election betting markets. Despite a partial court victory for Kalshi on Sept. 6, the platform still faces legal setbacks with temporary stay orders. Meanwhile, Congressman Ritchie Torres has urged the CFTC to regulate, not ban, election markets to prevent illegal platforms from gaining traction. As the 2024 US election nears, cryptocurrency is still a factor for some voters, but its overall influence is secondary to other key issues like the economy and reproductive rights.
CFTC Pushes to Block Election Markets
The United States Commodity Futures Trading Commission (CFTC) has raised some concerns about potential manipulation in prediction markets in a recent filing against US-based predictions platform Kalshi. The regulator specifically referred to examples of market manipulation in competitor platforms, like Polymarket and PredictIt, as evidence of the risks associated with election betting markets.
One example involved a group of traders manipulating a market on Vice President Kamala Harris's chances in the 2024 US presidential election. Another case involved a fake poll that affected the price of a contract related to Senator Debbie Stabenow’s re-election.
Kalshi also offers election-related betting, and had a partial victory on Sept. 6 when District Court Judge Jia Cobb ruled that the CFTC overstepped its authority by ordering the platform to stop its election markets. This ruling was seen as a big win for the crypto industry. Some people considered it as a step toward legitimizing prediction markets.
However, after an emergency motion from the CFTC, Judge Cobb issued a temporary stay order on Sept. 9, preventing Kalshi from offering election betting markets. Kalshi briefly launched its election market on Sept. 12, but it was quickly taken down after another stay order was issued by the appeals court. The CFTC filed an appeal on the same day and continued to argue that Kalshi’s operations posed serious risks of market manipulation.
Kalshi argued that blocking its election markets will cause severe financial harm, particularly as similar unregulated platforms continue to operate. The CFTC dismissed this argument, and called it “sophomoric” and compared it to a pharmacy claiming the right to sell cocaine because it’s available on the black market.
The CFTC also stated that the financial harm to Kalshi is insignificant compared to the potential damage from allowing election bets. The case has become a legal battleground over whether Kalshi’s activities constitute gaming under US law and fall under the CFTC's jurisdiction.
Congressman Pushes CFTC to Regulate, Not Ban, Election Markets
New York Congressman Ritchie Torres recently argued that rather than banning election betting contracts, US regulators should focus on creating a regulatory framework to prevent bad actors from dominating these markets. In a letter to the US CFTC chairman Rostin Behnam, Torres suggested that the commission should work towards regulation rather than prohibition.
Screenshot of Torres’ letter to the CFTC
He also believes it is necessary for the CFTC to concentrate on promoting responsible innovation in financial markets, and offered his support in addressing concerns and providing necessary resources.
Torres warned that the CFTC’s ongoing legal battle to ban election betting contracts could cause broader harm by delaying crucial regulations meant to protect election integrity and consumers. He also shed some light on the risk that unregulated markets could gain market share if action is not taken quickly. Torres urged the CFTC to collaborate with regulated entities to ensure election integrity and safeguard consumers from the dangers of illegal election markets.
His stance aligns with recent comments made by Gemini co-founder Cameron Winklevoss, who supported the idea of decentralized prediction markets. Winklevoss argued that these markets allow participants to have "skin in the game" by betting on outcomes, distinguishing them from polls or expert opinions.
On the other hand, the CFTC holds firm that allowing gambling on political races could disrupt markets and threaten the integrity of US elections.
Crypto a Key Issue for Voters?
As the 2024 US election season begins, the crypto industry is rallying behind candidates who are seen as supportive of digital assets. Dr. Tonya M. Evans, a law professor at Pennsylvania State University, recently shared some of her insights on how cryptocurrency could influence the election outcome.
Dr. Evans revealed that the race will likely be determined by very narrow margins, and while crypto could play a role, it may not be the decisive factor for voters. She explained that pro-crypto voters who also care about other issues are unlikely to base their decisions only on candidates' crypto policies.
2024 US presidential election projections (Spurce: 270towin)
Dr. Evans also pointed out the strategic importance of battleground states in the presidential race, as very small shifts in voter sentiment in states like Pennsylvania, Georgia, and Arizona could influence the final result. She also shared that support for cryptocurrency transcends party lines as pro-crypto political action committees have spent close to $14 million to back candidates from both parties.
While crypto is an important issue for some voters, Dr. Evans pointed out that it still ranks below other key topics, like reproductive rights and the economy. In fact, a recent poll by Benzinga revealed that only 6% of respondents wanted presidential candidates to discuss crypto, compared to 45% who prioritized the economy and job creation.
Crypto will have an impact on people’s vote (Source: Gemini)
However, a Gemini poll found that 73% of adults surveyed said a candidate's stance on cryptocurrency would have at least some impact on their vote. This suggests that while crypto is not the top issue for most voters, it is still an influential factor in the 2024 elections.
Trump Safe Following Shooting Incident
In other political news, former President Donald Trump is reported to be safe after gunshots heard near his location at the Trump International Golf Club in West Palm Beach, Florida. Trump spokesperson Steven Cheung confirmed the safety of the former president but provided no further details.
The golf course was locked down after the incident, and law enforcement officials reportedly recovered an AK-47 at the scene. Although it is unclear if this was an assassination attempt, authorities believe the shooter may have been targeting Trump.
This happened after a previous assassination attempt on July 13 of 2024, during a campaign rally in Butler, Pennsylvania. In this case, the gunman was fatally shot by Secret Service agents.
The July incident had a big impact on prediction markets, where Trump's odds of winning the presidency surged. Additionally, the Trump-themed memecoin, MAGA (TRUMP), spiked by 52%. Bitcoin also saw a rally, and reached $64,671 in the aftermath of the failed attempt.
2024 Presidential election odds (Source: Polymarket)
Currently, Trump’s lead in the Polymarket prediction market has weakened after his debate with Vice President Kamala Harris. His odds of winning the election have slipped by 3%, leaving him and Harris in a tight race as the November election approaches. Trump’s highest odds were recorded after the July assassination attempt, but the gap between his campaign and others has since narrowed.
