Commodity Futures Trading Commission headquarters in Washington, DC
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contract market calciex In recent days, the exchange has listed more than 20 new options for its customers to bet on political outcomes, including the presidential election, the popular vote and electoral vote difference, and individual Senate races.
The new contract was added to Kalsi’s platform within days of a federal appeals court ruling in the company’s favor on October 2nd. The ruling lifts a temporary restraining order that had barred Karshi from offering political parties control of each parliament after the November elections. .
The next day, Carsi offered a contract that would allow customers to bet on the winner of the presidential election and avoid potential losses.
As of Wednesday, more than $3 million had been wagered on political contracts on Carsi’s site, the majority of which was bets on whether Vice President Kamala Harris or former President Donald Trump would win the presidential election. Ta.
Other deals you can bet on Wednesday include the outcome of individual Senate races, which states will be turning points in the presidential election, which presidential candidates will win individual battleground states, and the race for the White House. The difference in victory was included.
Karshi CEO Tarek Mansour said in an interview that the response to the exchange’s new political contract option was “fantastic and there was huge demand.”
Mansour said adding such an option was “always planned” as the company fights the law’s ban on these types of contracts. Commodity Futures Trading Commission.
For Mansour, betting contracts on political outcomes are a way for investors to avoid the broader economic impact of one political outcome on another, not a way to influence the election itself.
“Each of these markets has different risks,” he said. For example, if the president imposes tariffs, it can affect customers’ financial health.
He said Kalsi’s political outcome contracts are less likely than the “bundles” of trades offered by investment banks to provide clients with exposure to the election of a particular presidential candidate, and are less likely to provide a direct means of hedging such risks. Said to be a method.
He said it has a “healthy mix” of both customers and speculators who want to hedge financial risks.
“All of Kalsi’s actions are within the law and regulated,” Mansour said, noting that exchanges are required to keep records about their customers available to the federal government.
“We believe the law is on our side,” he said.
The CFTC disagrees.
The CFTC said Mr. Carsi “engaged in full-throttle election gambling.” filing Tuesday with the U.S. Court of Appeals for the District of Columbia Circuit.
The CFTC said more political races in the Carsi contract could soon be available for betting, citing the terms of the agreement published on the exchange’s website. That includes 435 individual House races and more state-level gubernatorial races.
“Some of these clearly contradict Kalsi’s own assertions in recent court hearings that the contract is not a game because it is based on economically significant events. ,” the CFTC said in its filing.
“This cannot be said about contracts that bet on whether the popular vote margin in a particular state is the closest, or contracts about the winner of the popular vote.”
The CFTC’s filing supported the regulator’s prior request that the appeals court expedite the CFTC’s appeal of a lower court ruling that allowed Mr. Carsi to accept bets on the outcome of political races. .
A CFTC spokesperson declined to comment on the matter to CNBC. But the commission argues that Mr. Kalsi’s contract could call into question the integrity of the election.
A federal district court judge in Washington, D.C., ruled last month that the CFTC’s ban on Carsi’s Congressional contracts was invalid because the regulator erred in finding the contracts included gaming and gambling. I put it down.
The Court of Appeal initially blocked the judge’s ruling from taking effect, preventing Mr. Carsi from offering any political contracts.
However, in a ruling last week, a three-judge panel of the Court of Appeals lifted the original ban, stating that if the contract were offered during the CFTC’s existence, the CFTC would not be able to “understand the CFTC or the public at this time.” “We have not been able to prove that irreparable harm will result.” Appeal from a judge’s decision.
Court of Appeals Judge Patricia Millett wrote in her ruling that the “issues on the merits” of the CFTC’s appeal are “tight and difficult” and that regulators are unlikely to ultimately see the ban on political contracts reimposed. gave reason to expect.
Another important issue for both Carsi and the CFTC is the timing of the court action.
The CFTC requested an expedited conference on Tuesday, stating that “the public has an extraordinary interest in the prompt resolution of the merits of this case.”
That’s because “the court’s decision has implications for the regulatory status of event contracts, the role federal agencies play in policing election markets, and, indeed, issues of election integrity and the perception of election integrity.” the regulator said in a filing. .
Qarsi CEO Mansour said there was “zero evidence” that political contracts “undermine the integrity of elections.”
Mr. Mansour said any attempt by clients to sway the market’s effective predictions of a particular outcome by betting on a particular candidate would be costly.
And even if it works in the short term, other clients will bet against that outcome if they find that the market has misestimated the likelihood of that election outcome, he said. said.
