The United States Commodity Futures Trading Commission (CFTC) has issued a new statement warning about the potential for manipulations on prediction markets, citing recent incidents on competitor platforms.
Manipulations on Prediction Markets
The CFTC noted that documented cases of manipulation have already occurred in some of the prediction markets pointed to by Kalshi. One such case involved a group of traders attempting to gamble on Vice President Kamala Harris winning the 2024 US presidential election. Another case involved using a fake poll showing Kid Rock leading Senator Debbie Stabenow, which impacted the price of Stabenow’s reelection contract on PredictIt.
CFTC vs. Kalshi Case
On September 6, the CFTC partially lost its initial case against Kalshi, effectively allowing the platform to continue offering election betting. However, on September 9, District Court Judge Jia Cobb issued a temporary stay order following an emergency motion from the CFTC to pause Kalshi from offering US election markets. Despite this, Kalshi launched its first election market three days later, but it was taken down the same day after another stay order from the appeals court.
Reactions and Consequences
In its latest filings, the CFTC pointed to the potential harm of allowing election bets on the upcoming presidential election compared to the financial opportunities Kalshi might miss out on. The regulator also questioned whether the prediction platform's operations constitute 'gaming' under US laws, which would make them subject to CFTC authority.
The case between the CFTC and Kalshi underscores the importance of regulating prediction markets and potential consequences of manipulations for public interests and financial markets.
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