WASHINGTON (Reuters) - The Commodity Futures Trading Commission on Monday quashed a proposal to allow options contracts on the U.S. presidential election, saying such “gaming” was not in the public interest.
The CFTC rejected an application by the North American Derivatives Exchange (Nadex) seeking to list options contracts tied to election outcomes such as the 2012 presidential race or whether Democrats or Republicans will control the U.S. House of Representatives and Senate.
“As a result of reviewing the complete record, the CFTC determined that the contracts involve gaming and are contrary to the public interest,” the agency stated in a press release.
Nadex self-certified the contracts in December and the CFTC conducted a 90-day review of the derivatives starting on Jan 3, 2012.
Tim McDermott, General Counsel for the Chicago-based exchange, expressed disappointment at the decision.
“We felt strongly that these products met all legal and regulatory criteria for listing, and that the public would benefit from having these products traded on a well-regulated exchange, rather than an unregulated offshore venue as currently is the case,” he said in a statement.
Bettors can currently pick their favorite candidates at Intrade, an Ireland-based electronic exchange, that also offers betting on U.S. economic conditions and movie awards.
Democratic Commissioner Bart Chilton told CNBC earlier on Monday the federal government should not sanction such bets.
“They don’t allow gaming on elections in Vegas and they know something about gambling,” Chilton said on CNBC’s Squawk Box.
Trading events in the United States have a mixed record. In 2003, the Pentagon closed down an effort to use futures contracts to predict acts of terrorism after the project drew a public outcry. The 2010 Dodd-Frank Act specifically outlaws futures contracts tied to assassinations, war and terrorism. But other, less-controversial contracts linked to events remain in the United States, like futures at CME tied to the snowfall in Minneapolis or the severity of the hurricane season. The CFTC decision comes a day before Republican presidential frontrunner Mitt Romney is expected to clench victories in primaries in Wisconsin, Maryland, and Washington, D.C.
Romney is buoyed by the chance of finally chasing Republican rival Rick Santorum from the race, but the difficulties in tackling Democratic President Barack Obama is becoming clearer.
A USA Today/Gallup poll found that women have helped Obama take a large lead over Romney in a dozen battleground states.
Reporting By Alexandra Alper; Editing by Michael Perry