Congressmembers Sarbanes and Raskin Urge CFTC to Reject Political Betting Proposal
Commentary by Steven Lofchie
Strengthening Democracy Task Force Co-Chair John Sarbanes (D-MD) and Representative Jamie Raskin (D-MD) urged the CFTC to reject a "congressional control event contract proposal" (see here) which would allow individuals to bet on a political party’s control in Congress.
In a Letter addressed to CFTC Chair Rostin Behnam, the representatives asserted that the proposal asks the CFTC to implicate itself in gambling and elections. They argued that such a result is a "wild departure from [the CFTC’s] core principles," and "outside of its mission."
The representatives also expressed concern that the proposal would pose a threat to the "democratic process by which [congress] is elected." They argued that "the proposed political event contract would only further incentivize [election denialism and extremism, and an increase in politically-motivated violence] and encourage bad actors, or even those just looking to make a fast dollar, to interfere with our elections and seek to sway voters outside of the democratic process." They said that the proposal could encourage bad actors to circulate false and misleading information to sway the election, such as through the use of AI. They cited recent articles on the circulation of "deepfakes" on social media, and noted warnings by "political operatives" that the "fake pictures and videos ... will soon be indistinguishable from real ones."
Commentary
One can appreciate a visceral reaction against allowing futures on election results, but the reasons against it are not obviously compelling. As a starting matter, elections do have economic consequences, including impacts on inflation and on particular industries, so there are economic reasons why market participants may want to go long or short to hedge, or why others may wish to speculate and provide liquidity. Secondly, polling, which is obviously allowed, has much the same impact as a futures market; it allows citizens to have a sense of the way that the vote is going. It would be interesting to see which way of predicting the future is more accurate. Third, it is not obvious why the legislators see the dangers of AI or deepfakes being exacerbated by futures. That just seems a bit like throwing concerns at the wall and seeing what sticks.
Maybe there is an upside, as well. If people could put a little money on it, maybe they would take more interest in the political process.