One of the few legal avenues for de facto election betting in the United States may soon reopen following a favorable ruling for prediction market Kalshi.
The U.S. Court of Appeals for the District of Columbia Circuit issued an order on Wednesday unpausing a lower-court decision that allowed Kalshi to offer election-related event contracts for a short time last month.
While the decision had been subject to an “administrative stay," and election betting at Kalshi had been paused pending the outcome of the court process, the Commodity Futures Trading Commission (CFTC) was seeking a full stay pending an appeal to the D.C. Circuit judges.
In arguing for the stay, the federal regulator warned of an “explosion” in election gambling that could ensue and hurt the public interest.
Interesting ruling. The D.C. Circuit appeals court decision today paves the way for Kalshi to re-offer de facto election betting, but leaves the door open for another pause if the CFTC can find some "cognizable harms" created by the event contracts, such as voter confusion. pic.twitter.com/YzSYMDlOT4
— Geoff Zochodne (@GeoffZochodne) October 2, 2024
Kalshi, meanwhile, argued that a stay could actually harm the public interest, as it would restrict U.S. election betting to unregulated exchanges.
The appeals court ruled against the stay on Wednesday, but it left the door open to another attempt by the CFTC if it can find proof of harm it can bring before the judges, such as contracts confusing voters about the strength of certain candidates.
“Because the Commission has failed at this time to demonstrate that it or the public will be irreparably injured absent a stay, we deny its motion without prejudice to renewal should more concrete evidence of irreparable harm develop during the pendency of this appeal,” Judge Patricia Millett wrote.
Wednesday’s order could free Kalshi up to re-offer its election betting markets, which, at least at first, were focused on which party would win control of the U.S. House of Representatives and Senate in November.
US presidential election markets are legal. Officially. Finally.
— Tarek Mansour (@mansourtarek_) October 2, 2024
Kalshi prevails. pic.twitter.com/jvObcQDczz
But Kalshi may not be the only entity about to start offering de facto U.S. election odds.
At the moment, only “experimental” prediction markets PredictIt and Iowa Electronic Markets offer election-related contracts, albeit in a relatively restrictive way. However, trading platform Interactive Brokers was preparing to launch a presidential election betting market before the Kalshi decision was stayed. Now that the decision is no longer frozen, it could free IB and others to take action on the election.
The launch of election markets on Kalshi and Interactive Brokers could help supercharge legal wagering on politics in the U.S.
Still, that activity would have to come through regulated entities like Kalshi, rather than online sportsbooks such as DraftKings or FanDuel, as is common in Canada and the United Kingdom.
