Elections, Democracy, Gamification, and Gambling
By Anton Becker, Communications Director, Better Markets
If you’ve been following this year’s tumultuous election, you’ve already seen gambling infiltrate our political conversation. Political pundits are not just referencing polls, but also the money being bet on the outcome of the Presidential election itself. With the rise of political betting, significant concerns have surfaced about the integrity of our democratic processes and the broader societal impact of such activities. As discussions intensify about the role of financial regulators like the Commodity Futures Trading Commission (CFTC) in overseeing election betting, it’s crucial to examine the potential harms and ensure that there is a clear and robust regulatory regime protecting Americans and the election process.
Wrong Agency, Wrong Times
The CFTC, a key financial regulatory agency focused on regulating the commodities and derivatives markets, has recently faced pressure, primarily from the efforts of KalshiEX, LLC(‘Kalshi’), to expand its purview to include political betting through event contracts. The rise of political betting sites like Polymarket, which are illegal in the United States, have also driven interest in betting on elections.
Better Markets vigorously opposed Kalshi’s attempts to offer event contracts that would enable $100 million bets on election outcomes and supports a CFTC proposed rule to ban these types of event contracts altogether. Here’s why.
The CFTC is the smallest, least funded, and least capable U.S. financial regulatory agency, but its mission and mandate are vital to every American. The CFTC exists to supervise and police the multitrillion-dollar derivatives and commodities markets. Those are the markets that determine the price and availability of critical products like cereal, bread, gas, oil, and everything that involves plastics. They are supposed to do all that with a budget of only $300 million or so a year – yes, $300 million to supervise and regulate multitrillion-dollar markets.
Make sure to check out Dennis Kelleher’s op-ed in The Financial Times encouraging Vice President Harris to resist crypto's special interest agenda.
Moreover, the CFTC is simply not the right agency to deal with issues like gambling, elections, election interference, and political corruption. Event contracts are designed for very specific purposes under the Commodity Exchange Act and they are specifically prohibited for gaming and activities that violate any state or federal laws. The CFTC’s jurisdiction and budget constraints make it ill-suited to oversee this complex and contentious area of betting on elections, which should instead fall under the Federal Election Commission (FEC) and state regulatory bodies.
Election Integrity
Allowing political betting, especially through financial markets, poses a serious risk to election integrity. Betting on political outcomes can create powerful financial incentives for interference. Imagine a scenario where billions of dollars are bet in a high-stakes election —such a situation could easily prompt attempts to manipulate or undermine the electoral process. The temptation for those with substantial financial stakes to influence election results is real and dangerous.
Already, there are worrying examples from other betting contexts. For instance, we’ve seen cases where gamblers have tried to disrupt sports events to win their bets. Transferring these tactics to the political arena, with potentially much larger sums involved, could have even more detrimental effects. The proliferation of deep fakes and other digital manipulations could further destabilize public trust in election outcomes, eroding confidence in democracy itself.
Earlier this year, AI robocalls impersonating President Biden targeted New Hampshire primary voters in an effort to suppress turnout. We will undoubtedly see more such tactics before November, and enabling huge financial investments in the outcome would only supercharge them, with potentially dire consequences for our democracy.
Just look at what happened in the United Kingdom this summer. Illicit bets were reportedly placed by political party members and police officers, some of whom had insider knowledge of the date of the general election before Rishi Sunak, the Prime Minister at the time, publicly announced when it would be held. This type of insider trading drives voter mistrust and has the potential to weaken democratic institutions in the United States.
Gamification and Addiction
Gambling has well-documented negative consequences, including addiction, financial ruin, and severe mental health issues. The design of modern gambling platforms—whether for sports or financial markets—often incorporates gamification strategies that exacerbate these problems. These platforms are engineered to maximize user engagement, frequently at the expense of the users' well-being.
During the GameStop frenzy of 2021 we saw a sizeable increase of retail investors in the stock market. These investors were not really in the market to build wealth over time, but were taking part in day trading driven by platforms like Robinhood, which hook users through slick marketing, predatory app features, and hip/cool logos, all of which disguised the owners’ get-rich-quick schemes. (Read more about these development in our Western New England Law Review articles on gamification.)
By scrolling through websites like Kalshi and Polymarket, you will find many of the same gamification features as Robinhood. If political betting becomes widespread, we can expect to see an increase in gambling-related harms. Users will be ensnared in destructive betting behaviors and face mounting debt and mental health challenges as a result. After the GameStop trading frenzy in 2021 gambling addiction hotlines began to receive calls for help from day traders and retail investors. The risk of addiction is compounded by sophisticated algorithms that exploit psychological vulnerabilities, making it harder for individuals to make rational decisions and manage their betting habits.
What’s at Stake
As a society, we must remain vigilant about the broader implications of gamifying the political processes. We need to foster a culture that values and respects democratic institutions and discourages activities that undermine their integrity. The potential harms of political betting underscore the need for a comprehensive approach to regulation that prioritizes the public interest and safeguards democratic values.
The risks associated with political betting—ranging from election interference and compromised election integrity to a distracted financial regulatory agency and increased social harm—make a compelling case for prohibiting it. Regardless, it’s imperative that financial regulators like the CFTC are not forced into areas where they lack both expertise and resources. If the U.S. decides that betting on elections should be allowed—even with all the risks and dangers—then it needs to be managed by agencies with the appropriate jurisdiction, experience, expertise, and resources to do the job right. Ideally, that would include prioritizing the public interest in election integrity and democracy, not profit maximizing for private companies looking to make a quick buck.