The Commodity Futures Trading Commission (CFTC) issued an order against a request by KalshiEX LLC to intermediate a betting market on who will control Congress. You would think, wouldn’t you, that betting on politics as politicians bet on your future (just consider the federal debt, which increases by trillions of dollars every year) would just be a matter of economic freedom and free speech. You would think, at the very least, that information produced by prediction markets, often more reliable than simple opinion polls with no skin in the game, would be welcome. But the CFTC determined that

the contracts involve gaming and activity that is unlawful under state law and are contrary to the public interest, and therefore … the contracts are prohibited and cannot be listed or made available for clearing or trading on or through Kalshi.

The question is, What is the public interest the CFTC invokes? We read in the law (7 U.S. Code § 7a–2) that:

… the Commission may determine that such agreements, contracts, or transactions are contrary to the public interest if the agreements, contracts, or transactions involve—

(I) activity that is unlawful under any Federal or State law;

(II) terrorism;

(III) assassination;

(IV) war;

(V) gaming;

(VI) other similar activity determined by the Commission, by rule or regulation, to be contrary to the public interest.

In other words, besides a list of actions deemed to be contrary to the public interest, the public interest includes any agreements, contracts, transactions, or activities “determined by the Commission, by rule or regulation, to be contrary to the public interest.”

This circular definition is not surprising given that there is no way to define the public interest if equal weight is to be given to the preferences of all citizens. The demonstration has been developed by economists over the past 250 years and finally, closer to us, by welfare economics and Kenneth Arrow’s Impossibility Theorem (see my Independent Review article on “The Impossibility of Populism“). Only the more modest hope of defining a common interest appears realistic as implied by the work of Friedrich Hayek* and that of James Buchanan, two Nobel economists.

Even in a short post, we can go a bit farther. The CFTC’s concept of the public interest illustrates what Anthony the Jasay wrote about attempts to define something like the public interest, that is, social welfare, by comparing the benefits of certain individuals against the costs imposed on others:

The long and short of it is that objective and procedurally defined interpersonal comparisons of utility … are merely a roundabout route all the way back to the irreducible arbitrariness to be exercised by authority… [T]he two statements “the state found that increasing group P’s utility and decreasing that of group R would result in a net increase of utility,” and “the state chose to favor group P over group R” are descriptions of the same reality.

In short, the “public interest” is nothing else than what the state arbitrarily decides it is because it serves the purposes of politicians and bureaucrats—here, their interest in the control and surveillance of finance and political predictions.

Hayek and Buchanan did not go as far as de Jasay, but their theories also represent a fundamental challenge to the simplistic public-interest conception illustrated by the CFTC. It is surprising how many people use the expression “public interest” like an incantation, without reflecting on what it means, if it means anything, and how it can fit in a liberal social order.


* I provide an introduction to Friedrich Hayek’s social and legal thought in my separate reviews of the three volumes of his trilogy Law, Legislation, and Liberty: Volume 1, Rules and Order; Volume 2, The Mirage of Social Justice; and Volume 3, The Political Order of a Free People.