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Crypto Platforms Facing Legislative Challenges
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Polymarket, a cryptocurrency prediction platform, and Kalshi, a derivatives exchange, were nearing a $20 billion valuation before they encountered a significant legislative hurdle from the US Congress.
The BETS OFF Act: A Move Against Risky Crypto Predictions
This week, Senator Chris Murphy from Connecticut and Representative Greg Casar from Texas introduced a significant piece of legislation known as the BETS OFF Act, an acronym for Banning Event Trading on Sensitive Operations and Federal Functions. The bill aims to prohibit placing, accepting, or facilitating bets on events such as terrorism, assassinations, wars, or any scenario where the outcome is already known or can be influenced by the bettor.
The legislation extends beyond US borders, targeting offshore crypto platforms that trade such contracts. It mandates that payment processors sever ties with these platforms, and US-based entities involved in promoting or managing these activities could face criminal charges. Furthermore, any registered commodity exchange offering such contracts would be prohibited from continuing these practices. The law is set to become effective 30 days after being signed.
Events Leading to Increased Legislative Scrutiny
The proposed bill comes in the wake of several incidents that captured the attention of lawmakers in Washington. Notably, anonymous accounts on Polymarket made substantial bets on the outcomes of US military actions in Iran and the extraction of Venezuelan President Nicolás Maduro, yielding significant profits. Senator Murphy highlighted the potential conflicts of interest when individuals linked to government decisions can anonymously benefit financially from insider knowledge.
This situation raises concerns not only about potential corruption but also about the possibility of decision-makers having financial incentives to manipulate policy outcomes to their advantage. Public opinion reflects these concerns; data from Data for Progress shows that 61% of independents and 57% of Republicans support banning bets on government actions, while 80% oppose markets linked to terrorism or assassinations.
A Surge in Legislative Initiatives Against Crypto Betting
The BETS OFF Act is just one of four significant legislative measures targeting crypto prediction markets introduced in quick succession. In January, Representative Ritchie Torres from New York proposed a bill to prevent federal officials from participating in markets tied to government decisions, following an incident where a trader made substantial profits betting on the capture of Maduro.
On March 5, Representatives Blake Moore of Utah and Salud Carbajal of California introduced a bipartisan bill compelling the Commodity Futures Trading Commission to ban contracts related to terrorism, war, elections, and government activities, with exceptions for state-regulated sports betting. Shortly after, Senator Adam Schiff and Representative Mike Levin presented the DEATH BETS Act, focusing on contracts linked to war, assassination, and individual deaths. This came after a significant surge in Iran-related trades on Polymarket.
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