Free and fair elections are the bedrock of democracy, and as we approach the next elections we are facing unprecedented threats. Some of these threats are well known, while others go largely unnoticed and could have serious consequences. Among the latter threats is a dangerous attempt to convince one of our financial regulators to effectively sanction gambling on the election outcome.
Such questions would be expected to be answered by the Federal Election Commission, which has the expertise, history, and authority to regulate elections. But a financial services company has petitioned an unnamed financial regulator to allow election betting through the commodities markets. The petition has the potential to unleash a flood of misinformation and harm investors without any clear purpose.
Karsi has asked the Commodity Futures Trading Commission to approve public trading of so-called event contracts, which allow investors to bet up to $100 million on which of the U.S. House and Senate will win control in November. The commission, naturally, The proposal was rejected The acquisition was announced last fall, but the story isn’t over yet. Following a standard play in the financial industry, the company Sued financial regulatorsThey hope that the court will overturn the decision of the Election Commission’s experts and allow the opening of the virtual election casino.
The stakes are high in the case, which is expected to go to trial in federal court in Washington this week. First and foremost, the ability to “win” tens or hundreds of millions of dollars in an election creates powerful new incentives for bad actors to influence voters and manipulate the outcome to favor their own bets.Deepfake” and other technological tools are readily available, increasingly cheap, and ready for distribution via social media.
Just a few months ago, AI robocalls impersonating President Biden They targeted voters in the New Hampshire primary in an attempt to suppress turnout. We will undoubtedly see more of these tactics in the run-up to November, and the ability to funnel huge amounts of money into the outcome could accelerate these tactics even further, with dire consequences for our democracy.
The idea of ​​gambling on elections is not new. In the run-up to the 2012 matchup between President Obama and Mitt Romney, bets on the outcome through Ireland-based InTrade website led many observers to believe the Republican candidate was likely to win. But upon closer inspection, one bettor had placed a large bet on Unfairly defending Romney.
Beyond the threat to democracy, election gambling could inflict massive damage on investors. As continued access to markets through game-like smartphone apps, ad campaigns filled with celebrity faces, and deepfake disinformation becomes more widespread, more Americans will be lured into risky bets. These technologies could generate speculative investment fevers that inflict huge damage on investors.Meme StockThe craze of 2021.
Growing reliance on cryptocurrency trading and sports betting presents the danger of such activity expanding, and the threat to investors will only grow as gambling options inevitably expand beyond Congress’ control to other federal, state and local elections.
Election betting contracts involve additional financial risks. Unbound by fundamental values, these markets are extremely easy to manipulate and difficult to monitor, further exposing unwary investors to risk. The information that determines the price of the contracts will be a patchwork of unregulated, opaque and unscientific sources, including opinion polls and media reports, which vary widely in rigor and reliability. The “house” that sets the odds and others seeking profit can selectively collect, distort and deploy data to manipulate prices.
What are they for? These contracts serve no useful purpose whatsoever. Originally limited to trading futures contracts on traditional commodities such as crops, livestock and precious metals, commodities markets have steadily grown to encompass more abstract “goods” such as stock index futures. Event contracts are the latest stage in this evolution, and while some of them perform useful functions in markets, the political gambling contracts in question serve no useful purpose whatsoever.
“These contracts are not a reliable means of hedging price fluctuations or setting the prices of the essential goods Americans rely on. That’s what the Commodities Commission is supposed to regulate. As the smallest and least resourced financial regulator in the United States, the Commission should remain focused on overseeing the multi-trillion dollar commodities and derivatives markets, not attempting to oversee the electoral process.”
For over 200 years, the courts have consistently Warned “There is a unique social harm that would result from the corruption of our electoral process through gambling. Congress no doubt recognized the extraordinary dangers posed by this idea, which is why it gave the Commission the power to ban such contracts. The Commission was right to say no, and for the sake of our democracy, so should the federal courts.
Dennis Kelleher is co-founder, president and CEO of Better Markets. Lisa Gilbert is executive vice president at Public Citizen.
