CFTC Proposes Ban on Derivatives for Political and Sports Event Betting amidst Regulatory Challenges

In response to growing concerns regarding the potential negative impact of derivatives being used for political and sports event betting, the U.S. Commodity Futures Trading Commission (CFTC) is set to propose a ban on listed derivatives related to major real-world events, including U.S. elections. This proposal follows lawsuits brought against the regulatory body by online marketplaces PredictIt and New York-based exchange KalshiEx, who had applied to list event contracts but were subsequently rejected. The CFTC chair, Rostin Behnam, asserted that such contracts not only fail to serve the economic purpose of futures markets but are also considered illegal in certain states and could potentially preempt state responsibility for federal election oversight. The proposed regulation, titled “Gaming”, would encompass derivatives allowing bets on sporting events and catastrophic incidents such as terrorism and assassinations. The CFTC’s commissioners are expected to vote on the proposed regulation on Friday; however, it is uncertain whether this rule will be implemented before the commencement of the upcoming NFL season or the U.S. elections due to the mandatory 60-day public comment period followed by a further vote to ratify the regulation.