Should investors be allowed to bet on the 2012 election?
This week, government regulators told a Chicago futures exchange that it can't take bets on who will win the 2012 elections. The North American Derivatives Exchange, or Nadex, had applied for permission to let people buy and sell contracts for as little as $100 that would pay out based on the outcome of the presidential race, or whether Democrats or Republicans end up controlling the House and Senate next year. The Commodity Futures Trading Commission said the contracts amount to "gaming and are contrary to the public interest." Was that the right call?
This ban doesn't seem fair: It seems plausible, as Nadex argued, that investors might want to use these derivative contracts to, say, "hedge against the possibility of a tax increase if President Barack Obama won a second term," says Paula Dwyer at Bloomberg. Moreover, the CFTC "allows political events contracts to trade on the Iowa Electronic Market, sponsored by the University of Iowa." And the website Intrade, based in Ireland, allows election betting. Why not "bring that activity onshore," where it can be regulated?
"Want to bet on the 2012 election? The CFTC says no"
We can't turn elections into high-stakes poker: Allowing gambling on election results would send us down a "very slippery slope," Bart Chilton, a Democratic CFTC member, tells The New York Times. It would allow supporters of a candidate to buy up huge stakes that could make a candidate or party look like the inevitable winner, possibly swaying votes. "We need to be super careful about handing part of our electoral process over to the trading pits."
"Panel rejects proposal to allow election-related trading"
C'mon. This is no big deal: I am shocked — shocked! — that someone wants to mix money and politics, jokes Matt Levine at Dealbreaker. Really, Nadex fans shouldn't "lose too much sleep" over this. It's unclear how effective hedging against the policies of a given candidate is, and if you're determined to try, you can still bet for or against Obama by trading something else — health-care stocks, for example. As for me, "all my money is in Rick Perry futures." Any takers?
"There's no betting here, this is a futures exchange"