Congressman Ritchie Torres has called on the Commodity Futures Trading Commission (CFTC) to regulate election-related prediction markets rather than blocking them.

In a letter addressed to CFTC Chair Rostin Behnam, Torres urged the regulator to focus on promoting responsible innovation and working with platforms like Kalshi and Polymarket to ensure such markets are regulated rather than pushing traders towards illegal, unregulated platforms.

Torres’ letter followed a Sept. 6 court ruling that partially overturned the CFTC’s efforts to prevent Kalshi, a US-based prediction platform, from offering election-related contracts. He emphasized that further legal challenges could harm both election integrity and consumer protection, allowing illegal platforms to flourish.

Torres wrote:

“The CFTC has a mandate to promote responsible innovation.”

He urged the agency to collaborate with regulated market participants, ensuring election-related contracts are conducted transparently and securely within regulated markets.

Polymarket declines amid uncertainty

Polymarket has seen a significant decline in activity over the last few days as regulatory pressure and uncertainty over election betting continue to mount.

According to Dune Analytics, Polymarket’s daily active traders dropped by nearly 40%, from 12,595 on Sept.11 to 7,627 by Sept. 15. The platform’s daily trading volume also fell dramatically, down 85.6%, from $37.2 million to $5.35 million over the same period.

The drop in activity follows the CFTC’s proposal to limit certain event contracts, particularly those related to political outcomes. The regulator has expressed concerns about the potential for manipulation in such markets, citing instances where fabricated information, like a fake poll involving musician Kid Rock, distorted market prices.

Despite the regulatory challenges, Polymarket has gained some mainstream recognition, with Bloomberg recently integrating the platform into its financial terminals. The move suggests that interest in decentralized prediction markets is growing, even as regulators scrutinize the sector more closely.

Intensifying debate

The debate over election prediction markets intensified on Sept. 6 when a federal court ruled in favor of Kalshi, allowing the platform to offer election-related contracts. The platform hailed the decision as a historic moment, stating that for the first time in 100 years, Americans could legally trade on election outcomes.

However, the CFTC quickly filed an emergency motion to stay Kalshi’s election markets, citing concerns about potential manipulation. The agency has argued that election markets could undermine public trust in the democratic process.

The CFTC’s actions have faced criticism from lawmakers like Torres, who urged the watchdog to accept the court’s ruling and focus on regulating these markets to ensure transparency and consumer protection.

Torres wrote in his letter:

“The CFTC should be focusing on regulating exchanges, protecting consumers, and safeguarding the integrity of elections.”

He warned that continued legal battles could push traders toward unregulated platforms, further jeopardizing election integrity.

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