H.R. 8771: Campaign Event Contract Integrity Act

This bill, titled the Campaign Event Contract Integrity Act, aims to regulate trading in political event contracts by establishing guidelines and prohibitions to prevent insider trading and enhance market integrity. Here is a breakdown of the key components:

Purpose and Scope

The overall purpose of the act is to:

• Prohibit certain individuals involved in political campaigns from trading political event contracts while possessing confidential, nonpublic information.
• Require platforms that facilitate trading in political event contracts to maintain safeguards against insider trading and market manipulation.

Definitions

The bill outlines specific definitions including:

• Covered campaign-affiliated individual: This includes anyone compensated by or providing services to federal candidates, political committees, or organizations engaged in campaign activities.
• Covered platform: Refers to any registered entity or marketplace that allows trading of political event contracts.
• Material nonpublic campaign information: Confidential information that could influence trading decisions, such as internal polling data, fundraising strategies, and other campaign analytics.
• Political event contract: This involves financial agreements that derive value from the outcomes of elections, nominations, or other political events.

Prohibitions on Trading

The bill imposes several trading restrictions:

• Covered campaign-affiliated individuals are prohibited from buying or selling political event contracts while in possession of material nonpublic campaign information.
• They cannot disclose such information if it could foreseeably lead to trading in political event contracts.
• This also includes provisions to prevent evasion of these rules by prohibiting trading on behalf of a covered individual to circumvent the law.

Platform Responsibilities

The act mandates that covered platforms establish policies to:

• Detect and prevent trading in violation of the act.
• Identify suspicious trading activities.
• Monitor trading related to campaign activities.
• Maintain adequate records for investigations of violations.
• Report suspicious activities to the Commodity Futures Trading Commission (CFTC).

Furthermore, platforms must require traders to disclose whether they are associated with a federal campaign or have access to nonpublic information if their trading exceeds certain thresholds established by the CFTC.

Enforcement Mechanisms

The Commodity Futures Trading Commission is granted the authority to:

• Investigate violations and pursue civil enforcement actions.
• Impose civil penalties, which can include fines that may reach up to $250,000 or three times the profit gained from violations.
• Order the disgorgement of profits from illegal activities.

Additionally, the CFTC can refer evidence of serious misconduct to the Attorney General for further action.

Safe Harbor Provisions

The act includes provisions that clarify what activities are not prohibited, such as:

• Political analysis based solely on publicly available information.
• Journalistic activities, academic research, or public commentary.
• Trading by individuals without access to nonpublic information.

Rulemaking and Compliance

Within 180 days after the bill’s enactment, the CFTC is required to develop specific rules to implement the provisions outlined in this act.

Rule of Construction

The bill specifies that it does not alter or limit the existing authority of the CFTC under the Commodity Exchange Act, nor does it supersede any other federal laws regarding securities, campaign finance, or anti-corruption measures.

Relevant Companies

None found