CFTC Rejects Bid to Launch Political Election-Betting Market Alexander Osipovich and Paul Kiernan - WSJ Regulators rejected a proposal for a marketplace that would allow betting on congressional elections. The Commodity Futures Trading Commission said Friday that it blocked a financial startup from launching a political-betting market. The commission made the decision in a 3-1 vote, with all three Democratic commissioners endorsing a recommendation by CFTC staff to reject the proposal, according to people familiar with the matter. One commissioner, Republican Caroline Pham, abstained from the vote. /jlne.ws/3PrHGi3 CFTC Rejects Bid to Launch Political Election-Betting Market Regulator says the proposal would have turned the agency into an ‘election cop’ By Alexander Osipovich and Paul Kiernan Sept. 22, 2023 8:26 am ET Kalshi ,a startup led by Tarek Mansour, had sought to introduce a first-of-its-kind derivative contract related to the partisan control of Congress. PHOTO: DALIA KHAMISSY FOR THE WALL STREET JOURNAL Regulators rejected a proposal for a marketplace that would allow betting on congressional elections. The Commodity Futures Trading Commission said Friday that it blocked a financial startup from launching a political-betting market. The commission made the decision in a 3-1 vote, with all three Democratic commissioners endorsing a recommendation by CFTC staff to reject the proposal, according to people familiar with the matter. One commissioner, Republican Caroline Pham, abstained from the vote. The startup, Kalshi, had sought to introduce a first-of-its-kind derivative contract whose value would depend on whether Republicans or Democrats capture control of either the House or Senate in a particular year’s election. Critics of Kalshi’s plan have worried that giving citizens a financial incentive to cast their votes for certain candidates would fundamentally warp elections, and they feared the markets could be manipulated by political insiders. CFTC Chair Rostin Behnam said Friday the contracts Kalshi sought to list would have turned the agency into an “election cop,” given its duty to police fraud in manipulation in markets subject to its oversight. Kalshi has argued that the contracts would allow businesses to hedge against risks related to the outcome of elections, just as wheat futures might be useful to a bread company. Supporters said the proposed contracts would be safer for users than foreign venues for election betting, and that they would produce useful data for political scientists. “Today, we fundamentally disagree with the CFTC’s decision,” said Kalshi Chief Executive Tarek Mansour. “Given the need for this market, we believe it is inevitable for this activity to move to a regulated venue.” Kalshi first submitted its plan to the CFTC last year. Earlier this year, the company withdrew its initial proposal and resubmitted it with some modifications. The startup won CFTC approval to run a derivatives exchange in 2020. It specializes in so-called event contracts that allow users to bet on yes-or-no questions on topics such as economic data releases or the outcome of the Hollywood writers’ strike. Financial regulators have been wary of allowing contracts based on election outcomes. Federal law directs the CFTC to prohibit so-called event contracts involving “war, terrorism, assassination or gaming or any activity” that violates federal or state laws, or is against the public interest. In 2012, the CFTC shut down a bid by the North American Derivatives Exchange, or Nadex, to let investors bet on the outcome of presidential elections and the composition of the House and Senate.