The U.S. Commodity Futures Trading Commission (CFTC) wants to crack down on investors using derivatives contracts to speculate on elections, sports, awards shows and other events.
The derivatives regulator is proposing rule changes that would limit the kinds of event contracts that can be listed for trading by regulated exchanges amid concerns that certain futures have strayed into the realm of gambling.
In particular, the CFTC wants to curb the surge in trading on the outcome of elections, sports, prop bets and other events. The commission said such trading is contrary to the public interest and shouldn’t be allowed on a regulated exchange.
“To be clear, that means that even contracts on the outcome of a political contest such as an election could not be listed for trading or accepted for clearing under the proposed rule,” said CFTC chair Rostin Benham in a statement on the proposals.
These kinds of contracts don’t fulfill the economic purpose of futures markets and could interfere with election oversight, he noted.
“Contracts involving political events ultimately commoditize and degrade the integrity of the uniquely American experience of participating in the democratic electoral process,” Benham said. “Allowing these contracts would push the CFTC, a financial market regulator, into a position far beyond its Congressional mandate and expertise … and potentially place the CFTC in the position of monitoring such markets for fraud and manipulation in elections themselves.”
The proposals follow a surge in the listing of event contracts, the CFTC noted. More contracts were listed in 2021, and every year since then, than were listed in the previous 15 years combined.