Is this really setting our nation up for success? Let’s pray that our elections would be treated with more dignity than this.

From Fox Business. Derivatives exchange Kalshi Inc. is ready to let users bet on next month’s midterm Congressional election, with a timer on its website counting down the days, hours and minutes until the first U.S.-based election-betting market goes live.

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But the plan carries an asterisk: “pending regulatory approval.”

The Commodity Futures Trading Commission, which regulates derivatives, has set an informal Friday deadline for deciding whether to approve a Kalshi request to list options related to the partisan control of Congress.

Kalshi and its backers say that the proposed contracts would be safer for users than foreign venues for election betting, and that they would produce useful information for political scientists. Others point out that betting on elections is illegal in many states, worry about giving citizens a financial incentive to cast their votes for certain candidates and warn that political insiders could use the contracts to profit on nonpublic information. …

Betting on elections was widespread in the U.S. before World War II, sometimes exceeding the volume of stock trading, according to a 2004 paper by economists at the University of North Carolina at Chapel Hill. The activity tapered off after the 1940s as some states outlawed it and newspapers began to rely more on public-opinion polling to predict election results, they said.

Political betting now mainly takes place with sportsbooks located outside the U.S. Kalshi’s request to operate a regulated market comes as sports betting and other forms of gambling have come to many more states, and shortly after an explosion of speculative trading by small investors during the pandemic.

Financial regulators have been wary of allowing contracts based on election outcomes. Federal law directs the CFTC to prohibit so-called event contracts involving “war, terrorism, assassination or gaming or any activity” that violates federal or state laws, or is against the public interest.

“This is a classic example of the intersection between technology disruption and financial markets,” CFTC Chairman Rostin Behnam said Monday at a conference held by the Securities Industry and Financial Markets Association Of election-betting contracts, he said, “Some people are trying to push the envelope.” He didn’t go into further detail or mention Kalshi. …

Previous attempts to bring election contracts onto regulated financial markets have struggled in recent years. …

Arguments about whether the CFTC should allow Kalshi’s proposed election contracts center on two questions: whether they fall into one of the agency’s prohibited categories, and whether they are against the public interest. …

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(Excerpt from Fox Business. Photo Credit: rupixen.com on Unsplash)