Are You Ready to Bet on U.S. Elections? A Judge’s Ruling Opens the Door
Prediction-market startup Kalshi prevails in its bid to list political contracts, beating the CFTC
Kalshi will make its congressional-control contracts available to users for trading next week. Photo: Anna Moneymaker/Getty Images
Get ready for legalized betting as soon as next week on whether Democrats will take back control of the U.S. House of Representatives in November.
A federal judge on Friday cleared the way for Americans to place bets on the outcome of congressional elections via a prediction-market startup, a victory that could potentially open the door to legalized wagers on U.S. elections.
Still, it remained uncertain over the weekend whether the political betting markets would go live, after regulators filed an emergency motion seeking a two-week delay while they considered an appeal.
In a one-page order, U.S. District Judge Jia Cobb of the District of Columbia sided with the startup, Kalshi, and threw out a 2023 decision by the Commodity Futures Trading Commission that had blocked Kalshi from listing its congressional-control contracts.
Kalshi will make its congressional-control contracts available to users for trading next week and will move quickly to list other kinds of political-event contracts, said Luana Lopes Lara, one of the co-founders of Kalshi, in an interview.
Hours after Cobb’s ruling, the CFTC filed an emergency motion asking her to stay the decision until Sept. 22, noting that Kalshi could list the election contracts as soon as Tuesday morning.
“Time is of the essence in the issuance of a stay,” the CFTC said. Cobb had yet to respond as of late Saturday morning.
Kalshi sued the CFTC last year, arguing that the regulator had overreached its authority when it blocked the contracts. The contracts in question would allow investors to wager on whether Republicans or Democrats capture the House or Senate in election years.
“Election markets are now legal in the United States for the first time in 100 years. Americans will finally be able to trade the election on a U.S.-regulated market,” the startup’s CEO and co-founder, Tarek Mansour, said in a statement.
Cobb, who was appointed by President Biden, didn’t immediately release the reasoning behind her ruling, saying it would be detailed in a “forthcoming” memorandum.
The CFTC complained in its emergency motion that it was in “the unenviable position of finding out that it has lost but without any explanation or reasoning.” The commission said the public interest could be harmed even if election bets were allowed just temporarily and were then taken away by a successful CFTC appeal. It noted that the judge’s ruling paved the way for other trading platforms, besides Kalshi, to offer election bets.
“At a time when distrust in elections is at an all-time high, even a short listing of Plaintiff’s contracts…could harm public perception of election integrity and undermine confidence in elections,” the CFTC said.
In rejecting Kalshi’s contracts last year, the CFTC had argued that political-event contracts were a form of gambling, making them illegal under the federal laws that govern financial markets. CFTC Chair Rostin Behnam had also worried that allowing the contracts could lead his agency to be drawn into complex, politically sensitive investigations of election manipulation.
Other critics of election betting have said that giving citizens a financial incentive to cast their votes for certain candidates would fundamentally warp elections.
Many states, including Nevada, ban election betting. The practice is legal in some other countries such as the U.K., where bookmakers do a brisk business taking bets on U.S. elections.
Supporters of Kalshi have argued that its proposed contracts would be safer for users than foreign venues for election betting, and that they would produce useful data for political scientists.
Friday’s ruling comes as bettors have placed hundreds of millions of dollars of wagers on the November presidential election on Polymarket, a crypto-based prediction market that is off-limits to Americans since it reached a 2022 settlement with the CFTC.
Polymarket has enjoyed a surge in trading volumes as its users have bet on the race between former President Donald Trump and Vice President Kamala Harris, while Kalshi’s volumes have lagged behind. The court ruling allowing Kalshi to list election contracts could provide the startup with a boost against its offshore rival.
Election Betting Is Going Mainstream After Major Brokerage Gets on Board
Interactive Brokers to launch election bets next week, taking advantage of court ruling
The launch on Interactive Brokers, which has over three million client accounts, would open election betting to a broad customer base. Photo: Tiffany Hagler-Geard/Bloomberg News
Until a few days ago, election betting was banned by the federal government. Now it is set to reach millions of Americans.
The popular trading platform Interactive Brokers plans to launch a market where investors can bet on the outcome of the presidential election, taking advantage of a federal court ruling that has effectively legalized election betting in the U.S.
Starting Monday, Interactive Brokers plans to allow its users to place wagers on whether Vice President Kamala Harris beats former President Donald Trump in November, the company’s founder and chairman Thomas Peterffy said in an interview.
Interactive Brokers expects to follow up by allowing similar wagers on swing-state Senate races, Peterffy added.
Peterffy’s announcement came hours after a judge denied a last-ditch attempt by the Commodity Futures Trading Commission to prevent a startup trading platform from launching a betting market on congressional elections.
U.S. District Judge Jia Cobb of the District of Columbia ruled Friday that the CFTC had overreached last year when it blocked the startup, called Kalshi, from launching the congressional-control markets.
The CFTC—which has argued that such betting markets were unlawful and could harm the integrity of U.S. elections—filed an emergency motion to block Cobb’s ruling from taking force.
In a hearing Thursday morning, the judge rejected the CFTC’s arguments and cleared the way for Kalshi’s launch. The CFTC appealed her ruling immediately after the conclusion of the hearing.
Critics of election betting, including some Democratic politicians and liberal groups, say it could warp voters’ incentives and encourage bad actors to manipulate elections for financial gain.
“When big bets are cast on elections and dark money can smear candidates, you have the perfect combination of factors that can undermine trust in our democracy,” Sen. Jeff Merkley (D., Ore.) said in a statement, adding that the court ruling was “deeply damaging to the integrity of our upcoming election.”
Proponents say election-betting markets can provide useful, real-time insights into the dynamics of an election.
The current presidential race has led to a huge surge of activity at Polymarket, a crypto-based prediction market whose users have placed hundreds of millions of dollars of bets on the Harris-Trump race. Polymarket is off-limits to Americans under the terms of a 2022 settlement with the CFTC.
Two election-betting markets went live on Kalshi’s website shortly after Thursday’s hearing concluded, tied to whether Democrats or Republicans win control of the House and Senate in November. The debut means that Americans can now legally place bets on elections on a regulated U.S. marketplace.
“Now is finally the time to allow these markets to show the world just how powerful they are at providing signal amidst the noise and giving us more truth about what the future holds,” said Kalshi co-founder and CEO Tarek Mansour.
But the coming launch on Interactive Brokers—which, with over three million client accounts, is much larger than Kalshi—would open election betting to a far broader customer base.
Interactive Brokers’ election contracts will be part of its newly launched prediction market, ForecastEx, which made its debut earlier this summer. ForecastEx allows users to buy “yes” or “no” contracts in response to a particular question, and users who are proved correct in the end receive $1 per contract. Contract prices range from 2 cents to 99 cents and fluctuate depending on what users are willing to pay for that outcome.
So far, ForecastEx’s questions have been limited to the economy and climate. Once political contracts go live, prices on ForecastEx will reflect how market participants assess the probability of a candidate winning a particular election.
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