After the holidays, we will officially enter the next election year. It may seem like it’s been going on for years already, but there’s still almost a year to go.
People will make their predictions, and maybe even some friendly wagers, on who they think will win. Now though, more formalized betting is being touted by the Chicago-based North American Derivatives Exchange, or Nadex. Nadex proposes allowing on-exchange trading for people who would like to predict with their pocketbook the outcome of the next presidential election and whether Democrats or Republicans will control the U.S. House and Senate. The application has been placed before federal financial regulators.
No problem, right? Well, don’t bet on it. In fact, the submission raises significant concerns. I think the new financial reform law was abundantly clear that gaming wasn’t a legitimate function for regulated markets. After all, this type of betting on elections is illegal in Nevada, and, they should know what betting means.
The 2010 Dodd-Frank financial reform overhaul not only prohibited gaming contracts, but also banned event-based derivatives deemed to be contrary to the public interest. The law further prohibits any such contracts that are tied to terrorism, assassination or war.
That all seems to make sense. Would we really want legalized betting on acts of terror, or something like a celebrity death pool? That’s not the stuff for serious federal regulatory oversight.
I don’t believe Congress wanted us to get into the gambling or entertainment business. Our country’s financial markets are serious risk management venues that help facilitate the economic engine of our democracy and determine the prices consumers pay for just about everything from a mortgage to milk. We shouldn’t trivialize the importance of these markets.
At a recent presidential debate, former Gov. Mitt Romney offered to bet Texas Gov. Rick Perry $10,000 that Romney’s position on individual mandates in health care was not as Perry characterized it. Romney took a little heat for the size of the unaccepted wager, but maybe it was all in good fun. Nonetheless, that’s where the fun should stop. Our financial markets weren’t designed for gaming. So, don’t bet on it.
• Chilton is a commissioner on the U.S. Commodity Futures Trading Commission.