Congressman Ritchie Torres has called on the Commodity Futures Trading Commission (CFTC) to regulate election-related prediction markets rather than block them.
In a letter to CFTC Chairman Rostin Behnam, Torres urged the regulator to focus on promoting responsible innovation and work with platforms like Kalshi and Polymarket to ensure such markets are regulated rather than sending traders to illegal, unregulated platforms.
Torres’ letter followed a September 6 court ruling that partially nullified the CFTC’s efforts to prevent Kalshi, a US-based prediction platform, from offering election-related contracts. He stressed that further legal challenges could damage both election integrity and consumer protection, allowing illegal platforms to flourish.
Torres wrote:
“The CFTC has a mandate to promote responsible innovation.”
He urged the agency to work with regulated market participants to ensure that election-related contracts are executed transparently and securely within regulated markets.
Polymarket drops due to uncertainty
Polymarket has seen a significant drop in activity in recent days as regulatory pressure and uncertainty surrounding election betting continues to increase.
Polymarket’s daily active traders fell nearly 40%, from 12,595 on September 11 to 7,627 on September 15, according to Dune Analytics. The platform’s daily trading volume also fell dramatically, by 85.6%, from $37.2 million to $5.35 million over the same period. period.
The decline in activity follows the CFTC’s proposal to restrict certain event contracts, particularly those tied to political outcomes. The regulator has raised concerns about the potential for manipulation in such markets, citing cases where fabricated information, such as a fake poll involving musician Kid Rock, distorted market prices.
Despite the regulatory challenges, Polymarket has gained some mainstream recognition, with Bloomberg recently integrating the platform into its financial terminals. The move suggests that interest in decentralized prediction markets is growing, even as regulators keep a closer eye on the sector.
Intensifying the debate
The debate over election prediction markets intensified on September 6 when a federal court ruled in Kalshi’s favor, allowing the platform to offer election-related contracts. The platform called the decision a historic moment and stated that for the first time in a century, Americans could legally trade on election results.
However, the CFTC quickly filed an emergency motion to block Kalshi’s election markets, citing concerns about possible manipulation. The agency has argued that electoral markets could undermine public confidence in the democratic process.
The CFTC’s actions drew criticism from lawmakers like Torres, who urged the watchdog to accept the court’s ruling and focus on regulating these markets to ensure transparency and consumer protection.
Torres wrote in his letter:
“The CFTC should focus on regulating exchanges, protecting consumers and ensuring the integrity of elections.”
He warned that continued legal battles could push traders to unregulated platforms, further endangering election integrity.
