Polymarket Bettors Predict CZ Will Avoid Larger Prison Sentence, CFTC Eyes Ban on Election Derivatives

Polymarket bettors think Binance ex-CEO Changpeng "CZ" Zhao will spend less time in prison than what the U.S. Department of Justice is asking for. The Commodity Futures Trading Commission (CFTC) is considering a ban on derivatives for betting on U.S. elections and may also restrict event contracts related to sports and global health crises. The CFTC faces a lawsuit from Kalshi, which is challenging the agency's decision not to approve its plans for election-related contracts. Interest in the general election is at an all-time high, with nearly $117 million bet on a Polymarket contract about its outcome. The majority of the bets come from outside the U.S., as Polymarket is blocked for American users due to a settlement with the CFTC.

The Republican primary season was one of the shortest in history, with most contestants dropping out in weeks, unable to trump Donald Trump. Interest in the general election is at an all-time high, going by the nearly $117 million -- up from $100 million a few weeks ago -- bet on a Polymarket contract about its outcome. On paper, this $117 million would not have come from Americans, because part of a settlement with the CFTC requires Polymarket to block U.S.-based users.

Nevada Revised Statues § 293.830 states that any person who makes, offers or accepts any bet or wager upon the result of any election, or upon the success or failure of any person or candidate, or upon the number of votes to be cast, either in the aggregate or for any particular candidate, or upon the vote to be cast by any person is guilty of a gross misdemeanor. New Jersey and Texas also have similar laws on the books. In some other states, gambling on everything is illegal unless specifically authorized otherwise or if it takes place on Native American tribal territory. This specific authorization is how online sports betting became legal state-by-state.

In other countries, election gambling is also illegal. In Taiwan, the Presidential and Vice Presidential Election and Recall Act specifically prohibits it, and a Polymarket contract about that nation's recent general election led to arrests and a complete national-level block of its domain. PredictIt, a popular U.S. election betting site, is allowed to operate under a no-action letter from the CFTC, limiting the number of bettors on each question to 5,000 and the size of each bet to $850. The regulator yanked the letter last year and ordered PredictIt to shut down, but the platform sued and won the right to stay in business.

There's renewed talk of the Federal Reserve cutting rates as fears of stagflation grip both the traditional finance and crypto markets. On Kalshi -- which unlike Polymarket is licensed by the CFTC, does business only in the U.S., and settles bets in dollars -- the highest single probability (37%) is for zero cuts this year, although there's a combined 60% odds for one to three cuts.

When the cuts come, how low will they go? The hive mind says lower than 5.25%, giving it a 62% chance, and a 36% chance of it being lower than 5%. The central bank's benchmark rates are currently at 5.5%. Edits made by Marc Hochstein and Nick Baker.

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