The SEC Should Not Approve ETFs that are Designed for Gambling
WASHINGTON, D.C.— Benjamin Schiffrin, Director of Securities Policy for Better Markets, issued the following statement on the filing of Better Markets’ comment letter to the Securities and Exchange Commission (SEC) regarding its request for comment on how to regulate novel exchange-traded funds (ETFs) that seek to hold event contracts on elections and sports or futures contracts based on the performance of sports teams:
“The SEC should not allow funds that would be used for nothing other than gambling to be regulated as if they are similar to the ETFs in which millions of Americans invest. Although it has strayed from protecting investors under Chair Atkins, the SEC’s mission is supposed to be investor protection. Allowing these so-called ‘Novel ETFs’ to benefit from the ETF wrapper Americans have come to trust would only serve to deceive and further betray investors.
“Funds that hold event contracts on elections and sports or futures contracts that track the statistics of sports teams are inconsistent with the purpose of ETFs, which exist to facilitate investment in productive enterprises. As we show in our comment letter, the SEC itself has recognized that for ETFs to trade on exchanges it must find such trading to be in the public interest, and that such a finding would be difficult with respect to a product that served no investment, hedging, or other economic function. Because funds that seek to hold event contracts on elections or sports or futures contracts tied to professional sports teams serve no investment, hedging, or other economic function, they would not be in the public interest.
“The SEC has already blurred the line between investing and gambling in the ETF space by approving single-stock ETFs. Approving these Novel ETFs would eliminate the line completely. It is bad enough that the Commodity Futures Trading Commission is already allowing prediction market companies to offer unregulated sports betting under the guise that event contracts on sporting events are legitimate financial derivatives. The SEC should not allow gambling products also to be wrapped as ETFs. The SEC should not turn securities exchanges into vehicles for gambling, which is what approving these Novel ETFs would do.”
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Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.
https://bettermarkets.org/newsroom/the-sec-should-not-approve-etfs-that-are-designed-for-gambling/