Election wagering/ political betting/ election prediction markets/ Newslooks/ ATLANTIC CITY/ N.J./ A judge’s ruling allowed Kalshi, a New York startup, to begin accepting bets on which party will control Congress in November. This temporary decision has sparked concerns about market manipulation, but also seen significant wagering activity. The Commodity Futures Trading Commission plans to appeal the ruling.
Election Betting Surge – Quick Looks
- A U.S. judge cleared the way for legal election betting, allowing wagers on November congressional races.
- Kalshi, a New York-based startup, is offering yes-or-no prediction contracts on Senate and House outcomes.
- The Commodity Futures Trading Commission plans to appeal the ruling, citing risks of election manipulation.
- Early bets on Kalshi varied, with Republican Senate control priced at 76 cents per contract.
- Critics, including the nonprofit Better Markets, argue this move could harm public trust in both financial markets and democracy.
- The ruling might encourage other sportsbooks or online casinos to consider offering political bets.
Election Bets Soar After Judge’s Landmark Decision
Deep Look
Betting on U.S. elections took a major leap forward on Thursday after a judge’s decision permitted a New York-based startup, Kalshi, to offer bets on the outcome of the November congressional elections. The ruling, issued by U.S. District Court Judge Jia Cobb, temporarily allows Kalshi to offer prediction contracts nationwide. These contracts act as yes-or-no bets on whether the Republican or Democratic party will win control of either the Senate or the House in the upcoming elections.
Kalshi wasted no time in capitalizing on the ruling, immediately opening the door for individuals to place bets on congressional races. “The Kalshi community just made history,” said co-founder Tarek Mansour, who expressed optimism about the broader implications of this decision. He emphasized how prediction markets can provide insights into future outcomes, cutting through the uncertainty surrounding elections.
However, the ruling may be short-lived. The Commodity Futures Trading Commission (CFTC), a federal agency that had previously prohibited Kalshi from offering such bets, announced it plans to appeal the decision. The CFTC’s primary concern is the potential for these betting markets to create opportunities for manipulation, with individuals or groups attempting to sway election results for financial gain.
The CFTC’s lawyer, Raagnee Beri, voiced this concern during Thursday’s court proceedings, arguing that the contracts could incentivize malicious actors to influence the election process. Beri likened the potential threat to market manipulation in the commodities sector, where misinformation about events like droughts can affect crop prices. The same kind of market interference, Beri warned, could occur with election-related bets, posing a significant public interest threat.
Despite these concerns, the judge allowed Kalshi to begin accepting bets immediately. Prices on Kalshi’s platform fluctuated throughout the day, with a contract on Republicans winning the Senate priced at 76 cents. This meant a $100 bet could pay out $129 if Republicans took control. Meanwhile, the price for Democrats winning the House stood at 63 cents, which would return $154 on a $100 bet.
The CFTC, unswayed by Kalshi’s claims of transparency and investment, argued that the very nature of betting on elections could damage the integrity of the electoral process. Beri emphasized the broader danger of these contracts, highlighting how large financial incentives could distort the democratic process. In response, Kalshi’s legal team pointed out that foreign companies already accept election bets from U.S. customers without government regulation, making Kalshi’s regulated platform a more secure option for election-related markets.
Kalshi’s leadership has not yet indicated whether the company plans to extend its offerings to presidential election bets, a move that could significantly raise the stakes and heighten regulatory scrutiny. The current focus remains on the November congressional races, though the ruling could open doors for future political betting.
Interestingly, this is not the first time legal election betting has appeared in the U.S. In April 2020, West Virginia briefly allowed election betting before reversing its decision just an hour later, citing inadequate research.
Critics, including the nonprofit group Better Markets, fear that legalized election betting will further erode trust in both financial markets and the democratic process. Better Markets labeled the ruling as “dangerous,” warning that allowing individuals to wager on election outcomes could undermine confidence in elections at a time when faith in democratic institutions is already fragile.
Thursday’s ruling, while significant, is not the final say on the matter. The CFTC announced its intention to appeal the decision in the Washington, D.C., circuit court and requested a 24-hour stay of the judge’s ruling, which was denied. This means that for now, Kalshi can continue to offer these contracts, although the legal battle is far from over.
Kalshi has already made a name for itself with yes-or-no positions on a variety of political outcomes. These include bets on whether a government shutdown will occur, whether a Supreme Court justice will be confirmed, and where President Joe Biden’s approval rating will stand by the year’s end. While election betting remains controversial, its legality continues to evolve in the U.S., as seen by Thursday’s ruling.
