Will the Democrats take back control of the U.S. House of Representatives in November?
Bettors will be able to wager on that outcome and other election betting markets as soon as Tuesday morning, according to reports from The Wall Street Journal. However, with regulators filing an emergency motion while they considered an appeal, it's still unclear when political markets will go live.
Kalshi, the first U.S. federally regulated exchange allowing trades on the outcome of any event, got clearance from U.S. District Judge Jia Cobb of the District of Columbia to make its congressional-control contracts available to users for trading, paving the way for more legalized wagering on major U.S. elections.
The New York-based company’s co-founder and CEO, Tarek Mansour, posted on X (formerly Twitter) about the milestone, calling it a "historic moment for financial markets."
Kalshi just legalized trading on elections in the U.S.
— Tarek Mansour (@mansourtarek_) September 9, 2024
For the first time in 100 years, Americans will have access to legal election markets at scale.
Historic moment for financial markets. pic.twitter.com/lIvQAPXYNJ
The Commodity Futures Trading Commission (CFTC) issued a new rule proposal in May that would effectively ban wagers on political elections.
The top Wall Street regulator filed an emergency motion asking Judge Cobb to stay her decision until Sept. 22. Cobb did not immediately release the reasoning behind her ruling, which the CFTC highlighted in its motion, saying that it was in “the unenviable position of finding out that it has lost but without any explanation or reasoning.”
But is it legal?
Betting on elections is legal in the U.K. and some other countries, but many states like Nevada ban election betting.
The CFTC is concerned that public interest could be harmed even if election bets were allowed temporarily and then taken away by a successful appeal of Cobb's decision since the judge's ruling potentially opens the door for other trading platforms to offer election bets.
“At a time when distrust in elections is at an all-time high, even a short listing of [Kalshi’s] contracts… could harm public perception of election integrity and undermine confidence in elections,” the CFTC said.
When the CFTC previously rejected Kalshi’s contracts last year - leading to the lawsuit in question herein - the regulator argued that political-event contracts were a form of gambling, rendering them illegal under the federal laws that govern financial markets.
Kalshi’s supporters argue that its proposed election contracts pose safer bets for American users than the foreign operators offering election betting and could even produce useful data for political scientists.
Kalshi’s markets already go far beyond the elections in November. Among the plethora of bets listed smackdab on its homepage, the company offers wagers on things like:
- Starship manned mission to Mars launched before 2030?”
- Bill Belichick gets a head coaching job before May?
- Harvard application numbers next year?
- Number of hurricanes this year?
- New Spirit Airlines CEO this year?
Crypto-based prediction platform Polymarket has already accepted hundreds of millions of dollars of wagers on the November presidential election despite being off-limits to Americans since it reached a 2021 settlement with the CFTC.
