The Commodity Futures Trading Commission (CFTC), the federal agency responsible for regulating financial derivatives under the Biden-Harris administration, has taken steps to ban election-related betting on platforms like PredictIt. The CFTC's move stems from concerns that allowing bets on political outcomes could introduce more money into an electoral system already influenced by financial interests.

Rostin Behnam, the chairman of the CFTC, has pursued rules to outlaw election betting, arguing that the agency is not equipped to monitor political markets for fraud or manipulation. Behnam warned that such bets could undermine the integrity of the American electoral process, turning it into a commodity and degrading the democratic experience, according to a report by the Washington Post.

Despite these concerns, supporters of political prediction markets insist that the fears of election interference are overstated. They argue that the data generated by these markets could provide insight, including the opinions of the general public.

Last year, federal regulators rejected an application from KalshiEx, an exchange that is regulated and allows users to place bets on future events including things like the weather. The company had hoped to allow wagers on party control of Congress. Once it was denied, the group filed a lawsuit against the CFTC. 

Kalashi’s founder, Tarek Mansour, argued that “there is already money in politics” and that his organization is more transparent than campaign contributions. Proponents have also argued that these markets offer high-quality predictive data that can be more accurate than traditional polling, as traders with money on the line are often more informed about the issues.

As the CFTC tightens its regulations, there are concerns that election betting could shift to unregulated foreign markets. Some users have already discussed ways to bypass US regulations by using cryptocurrency on platforms like Polymarket, which was previously penalized by the government for operating without proper oversight.

While the CFTC has taken a hard stance on most political futures markets, it has allowed the Iowa Electronic Markets to continue operating. This small-scale market, founded by the University of Iowa for academic purposes, is limited to $500 investments and is seen as less of a threat due to its educational focus and minimal financial stakes.