Congressman Ritchie Torres is advocating for the regulation of election-related prediction markets by the Commodity Futures Trading Commission (CFTC), rather than outright bans.
In a recent letter to CFTC Chair Rostin Behnam, Torres called for the agency to foster responsible innovation and engage with platforms such as Kalshi and Polymarket to ensure these markets are properly regulated. He stressed the importance of preventing traders from seeking out illegal, unregulated alternatives.
This advocacy follows a September 6 court ruling that temporarily blocked the CFTC’s attempts to restrict Kalshi, a U.S.-based prediction platform, from offering election-centric contracts. Torres expressed concern that ongoing legal disputes may compromise election integrity and consumer protection, allowing unregulated platforms to prosper.
“The CFTC has a mandate to promote responsible innovation,”
He encouraged the CFTC to collaborate with regulated entities to ensure election-related contracts are executed transparently and securely.
Challenges for Polymarket Amid Regulatory Uncertainty
Polymarket is experiencing a notable decrease in activity amidst increasing regulatory scrutiny and uncertainty surrounding election betting.
Data from Dune Analytics reveals a nearly 40% fall in Polymarket’s daily active traders, dropping from 12,595 on September 11 to just 7,627 by September 15. Additionally, the platform’s daily trading volume plummeted by 85.6%, declining from $37.2 million to $5.35 million in the same timeframe.
This downturn follows the CFTC’s proposal to restrict certain event contracts, especially those related to political outcomes, due to fears of market manipulation. Notably, the CFTC cited instances of manipulated information—such as fabricated polls—to justify their concerns.
Despite these challenges, Polymarket has garnered wider recognition, with Bloomberg recently incorporating the platform into its financial terminals, indicating heightened interest in decentralized prediction markets amid regulatory scrutiny.
The Growing Debate on Election Prediction Markets
The discussion surrounding election prediction markets heated up on September 6, when a federal court ruled in favor of Kalshi, allowing the platform to proceed with offering election-related contracts. Kalshi heralded this ruling as a historic achievement, marking the first legal opportunity for Americans to trade on election outcomes in over a century.
Nonetheless, the CFTC swiftly reacted by filing an emergency motion to halt Kalshi’s election markets, citing potential risks of manipulation. The agency contends that such markets could erode public trust in the electoral process.
This regulatory approach has drawn criticism from lawmakers like Torres, who urge the CFTC to respect the court’s decision and pivot towards effective regulation of these markets to guarantee transparency and consumer safety.
“The CFTC should be focusing on regulating exchanges, protecting consumers, and safeguarding the integrity of elections,”
Torres warned that ongoing legal disputes could divert traders to unregulated platforms, thereby threatening the integrity of elections.
