Bipartisan lawmakers propose limits on prediction markets involving war, elections, and sports
A bipartisan pair of lawmakers in the House wants federal regulators to clamp down on certain prediction markets, arguing that some platforms now allow trades tied to events that could raise serious national security and public safety concerns.
U.S. Reps. Blake Moore, a Republican from Utah, and Salud Carbajal, a Democrat from California, have introduced legislation called the Event Contract Enforcement Act. Their proposal would direct federal regulators to block specific types of event-based trading contracts that lawmakers say are becoming increasingly controversial.
Prediction markets let people buy and sell contracts that pay out depending on how real-world events unfold. For years, those tools were commonly used in industries such as agriculture to hedge against uncertainty. But Moore and Carbajal say the industry has moved far beyond that original purpose.
They argue that some platforms now host contracts tied to issues such as terrorism, armed conflicts, elections, and sports competitions, areas they believe could invite manipulation or the misuse of sensitive information.
Moore warned that allowing trades tied to these kinds of events could create incentives that put the country at risk.
“Under-regulated prediction markets have exposed America to needless public safety and national security risks by allowing traders to invest in outcomes related to sensitive matters like terrorism, assassination, war, or elections,” Moore said in a press release. “Prediction markets also sponsor sports-related contracts against the wishes of many states, including Utah, that would otherwise prohibit these contracts if offered as traditional sports betting.”
Carbajal said the issue also raises concerns about people potentially profiting from privileged knowledge connected to government decisions or military activity.
“Under-regulated prediction markets are creating an environment ripe for insider trading. The monetization of military activities or election processes threatens our national security and further erodes public trust in government,” Carbajal said. “The Event Contract Enforcement Act is a strong first step toward protecting consumers and upholding ethical standards across all levels of government.”
House bill focuses on high risk prediction markets
The proposal would modify the Commodity Exchange Act and give the Commodity Futures Trading Commission stronger authority to police prediction market activity. The CFTC already oversees derivatives markets and event-based trading contracts, but the bill would expand its mandate.
If enacted, the legislation would make it illegal to list or trade contracts tied to several categories of events. This includes terrorism, assassination, war, illegal activity, election outcomes, or decisions and actions by federal, state, or local governments.
Sports and other gaming-related events would also fall under the prohibition.
The bill defines gaming broadly, covering “any aspect of a live, simulated, or virtual physical or mental challenge or game of chance.”
However, the measure leaves room for states to opt out of the gaming restriction. A state could choose to allow those contracts if its own laws explicitly permit them.
Supporters of tighter gambling regulation say the bill addresses what they view as a growing loophole in sports betting oversight.
“Today’s introduction of the Event Contract Enforcement Act is an important step toward reining in these pernicious prediction market operators that flout seriously debated and well-crafted state laws governing sports gambling,” said Congressman Mick Mulvaney, Executive Director of Gambling is Not Investing.
In a statement seen by ReadWrite, Mulvaney argued that some prediction market companies are effectively offering nationwide sports wagering without following the rules that licensed sportsbooks must follow.
“These so-called prediction markets are nothing more than a backdoor for unregulated gambling. They are unilaterally making online sports gambling widely available to anyone in the country without the consumer protections, age restrictions, and state and local tax benefits that govern legalized sports betting,” Mulvaney said.
“These unsafe and unregulated sports gambling markets are bad for Americans.”
Mulvaney added that his organization supports the lawmakers sponsoring the bill. “Gambling is Not Investing applauds Congressmen Moore and Carbajal for confronting these risks head-on.”
Featured image: Gage Skidmore via WikiCommons / CC BY-SA 2.0 / DoD Photo by U.S. Army Sgt. James K. McCann / CC BY 2.0
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