The Big Wager

In the world of wagering you can place a bet on virtually anything.  It doesn't have to be on the outcome of a ball game or a horse race.  People place bets on all sorts of subject matter; both common and arcane.

Starting a small business is a bet.  Investing in stocks may sound like a bet or walk like a bet; nevertheless, it requires an ownership interest.  

In the financial markets, spread betting is a form or derivative trading on various types of securities.  Traders (gamblers) speculate on how the price of a financial asset will move and make a profit or loss based-upon the outcome.  Unlike investing in stocks, they do not own or take a position in the underlying asset. 

Not all bookmakers take bets on anything and often you cannot find the bet you want to make available.  Nevertheless, you can wager on the possible outcome of anything from an emerging COVID variant, the Academy Awards, gasoline prices, flight delays and natural disasters.  Naturally distrustful of polling data, for a long time I have followed the Vegas line on election outcomes.  More information builds a basis for rational predictions.  Not that I am any better at it.

Speaking of which, PredictIt specializes in elections.  A contract for President Biden winning in November recently cost 51 cents versus 47 cents for former President Trump.  Both contracts pay $1 if you're correct. 

Alas, the Commodities Futures Trading Commission (CFTC) has been grabbing the bull by the balls with prediction market operators over both the merits and legality of wagering on domestic elections.  

In 2023 the CFTC rejected a bid by derivatives start-up Kalshi as a consequence of perceptions of violations of election law.   The CFTC has taken both Kalshi and PredictIt to court.

Much of this is an academic pursuit.  Common sense suggests to me that derivatives contracts are used all day long to help (and protect) businesses and individuals from the consequences of unexpected and disastrous outcomes.  If I had significant exposure to electric vehicle stocks I might hold a contract protecting me from a Trump election win in November.  Elections have consequences after-all.  And depending upon where you stand both good and bad.  But I digress.

The bottom line is the Vegas line on election outcomes,  I happen to think the odds-makers play an important role with the use of an additional tool to measure where voters might stand on a particular candidate. 

Does a financial services regulator have a role in elections?  Is this the purview of Congress and lawmaking?  I dunno.

Stay-tuned....