Rep. Ritchie Torres called on the Commodity Futures Trading Commission (CFTC) to regulate election-related prediction markets, rather than blocking them.
In a letter to CFTC Chairman Rostin Behnam, Torres urged the regulator to focus on promoting responsible innovation and working with platforms like Karsi and PolyMarket to ensure these markets are regulated, rather than steering traders to illegal and unregulated platforms.
Torres' letter comes following a Sept. 6 court ruling that partially overturned the CFTC's efforts to block the U.S.-based prediction platform Karsi from offering election-related contracts. He stressed that further legal challenges could undermine both election integrity and consumer protections, allowing illegitimate platforms to thrive.
Torres writes:
“The CFTC has a mission to promote responsible innovation.”
He called on authorities to work with participants in regulated markets to ensure that election-related contracts are conducted transparently and securely within the regulated market.
Poly market falls amid uncertainty
Polymarkets have seen a significant drop in trading volumes in recent days as regulatory pressure and uncertainty around election betting continues to grow.
According to Dune Analytics, Polymarket's number of daily active traders fell nearly 40% from 12,595 on September 11 to 7,627 on September 15. The platform's daily trading volume also fell a massive 85.6% over the same period, from $37.2 million to $5.35 million.
The decline in trading volume follows a proposal by the CFTC to restrict certain event contracts, particularly those linked to political outcomes. The CFTC has expressed concerns about possible manipulation in such markets, citing examples of market prices being distorted by fabricated information, such as fake polls about musician Kid Rock.
Despite the regulatory challenges, Polymarket is gaining mainstream recognition and Bloomberg recently integrated the platform into its financial terminals, a move that signals growing interest in decentralized prediction markets as regulators come under greater scrutiny of the sector.
Intensifying debate
The debate over election prediction markets intensified on September 6 when a federal court ruled in Karsi's favor, allowing the platform to offer election-related contracts. The platform hailed the ruling as a historic moment, saying that for the first time in 100 years, Americans could legally trade on election results.
But the CFTC quickly filed an emergency motion to shut down Karsi's election market over concerns about possible manipulation, which the agency argues could undermine public confidence in the democratic process.
The CFTC's actions have faced criticism from lawmakers like Torres, who have urged the regulator to accept the court's ruling and focus on regulating these markets to ensure transparency and consumer protection.
Torres wrote in the letter:
“The CFTC should be focused on regulating exchanges, protecting consumers and ensuring the integrity of elections.”
He warned that a continuing legal battle could drive traders to unregulated platforms, further jeopardizing the integrity of the election.
Mentioned in this article
