Posted on: September 17, 2024, 10:12h.
Last updated on: September 17, 2024, 12:54h.
The Commodities and Futures Trading Commission (CFTC) on Monday cited a $7 million bet on Mitt Romney to win the 2012 presidential election as an example of how results could be manipulated if the US were to permit wagering on political events.
The agency is engaged in a court battle with New York-based startup Kalshi, which offers election betting via event contracts, a type of derivative that allows users to speculate on the “yes or no” outcome of a specific event.
On September 7, a federal judge in Washington, DC sided with Kalshi in the case, and the platform briefly began taking election bets on September 12. Within a matter of hours, a federal appeals judge granted the CFTC’s request to block contracts on the election pending arguments from both parties to be heard later this week.
But what has all of this to do with Mitt Romney?
Rogue Trader
In the leadup to the 2012 election, an unknown trader plunked down millions on Romney on online trading exchange Intrade, which also offered events contracts on the election, and which has since been closed down by the CFTC.
This trader accounted for more than one-third of all bets placed on Romney to win, and about one-fifth of all bets placed on Obama to lose.
These positions were accumulated by placing large bids for Romney and large offers for Obama that effectively created a firewall, preventing prices from moving in response to incoming information,” according to a 2015 academic paper examining the incident.
The paper’s authors concluded that financial gain seemed to be an unlikely motivation for the trader. More plausibly, it was an attempt to “manipulate beliefs about the odds of victory in an attempt to boost fundraising, campaign morale, and turnout,” they suggested.
Kid Rock Hoax
In a filing Monday, the CFTC warned that election “manipulation has happened and is likely to recur.” The agency also cited a fake poll published in 2017 by the apparently fake organization, Delphi Analytica, that suggested musician Kid Rock was leading the US Senate race in Michigan.
Rock, whose legal name is Robert James Ritchie, wasn’t even running for office, although he was rumored to be considering it. Nevertheless, the poll went viral and affected the price of reelection contracts for Michigan Senator Debbie Stabenow. It’s speculated that a group of gamblers who hoped to convince people to bet on Rock so they could take the opposite position was behind the hoax.
“The district court’s order has been construed by Kalshi and others as open season for election gambling,” warned the CFTC. “An explosion in election gambling on US futures exchanges will harm the public interest.”
