CFTC Gives Up on Election Betting Case
Commentary by Steven Lofchie
The CFTC submitted an unopposed Motion for Voluntary Dismissal in a case concerning the offering of "event contracts" on a commodities exchange.
In May 2024, the CFTC proposed a rule to ban the listing and clearing of "events contracts" and "gaming" derivatives, citing its authority under the Commodity Exchange Act. (See related coverage.) The trading platform successfully challenged the rulemaking, arguing that the CFTC had exceeded its statutory authority by attempting to ban Congressional Control Contracts. The platform contended that its prediction markets serve a public purpose by offering tools for hedging economic risks related to political outcomes and providing reliable data for gauging electoral probabilities. (See related coverage.) The CFTC appealed the ruling.
Under the terms of a joint stipulation filed with the motion, both the CFTC and the trading platform agreed to bear their own legal fees and costs across all stages of the proceeding.
Commentary
Are all (or virtually all) prediction/event contracts now permissible?
At least as the law stands now, there is no obvious line that the CFTC can draw by which the CFTC may prohibit event contracts other, than those that involve predictions related to illegal acts. Where the law does not provide clear support for regulatory action, it would seem to be the policy of this Administration that the regulator should not act.
Rather, and largely appropriately, the decision to prohibit an activity that is not affirmatively and immediately harmful to others should be left to Congress. (Where might the line be drawn?)
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