There was a ton of wagering on this year’s U.S. presidential election, but that doesn’t mean the debate over its legality has been settled stateside.
The stage is already set for the legal and regulatory battle to continue in the New Year over de facto political betting done with operators such as Kalshi and Robinhood.
The most recent reminder that the fight over offering U.S. election odds is ongoing was the introduction of an anti-election betting bill on Wednesday by Democratic Reps. Jamie Raskin and Andrea Salinas.
Their “Ban Gambling on Elections Act” is the House companion to Democratic Sen. Jeff Merkley’s legislation.
The bill would amend the Commodity Exchange Act (CEA) to prohibit federally regulated entities from offering any "agreement, contract, transaction, or swap involving any political election or contest."
“With distrust in our electoral system at an all-time high, we must crack down on gambling in all U.S. elections,” Raskin said in a press release. “Our democracy demands reliable and transparent processes to cast ballots and tally results, not a horserace clouded by gambling odds and bets placed.”
With a new Congress due to be sworn in on Jan. 3 — and a government shutdown looming due to the ongoing failure to pass a new funding bill — it’s very unlikely a legislative ban on election betting will get much traction in the near future. Even so, the bill's introduction signals that some lawmakers plan to keep up the fight in 2025 and beyond.
Judgment day
Congress is not the only place where the fight will continue either.
While election betting has quickly proven popular in the U.S. (and has long been popular in other countries), it was only recently that an avenue was opened for legal wagering. That avenue involves federally regulated exchanges, not state-regulated sportsbooks.
The Commodity Futures Trading Commission (CFTC) has been trying to stifle that form of election betting through its regulatory process and the legal system. In September, however, a D.C. District Court judge sided with Kalshi, which allowed the prediction market operator to offer election-related event contracts. More than $500 million in presidential election contracts have been traded on Kalshi since.
The court case has to do with the CFTC’s decision in 2023 to bar Kalshi from offering congressional election contracts, as commissioners were concerned those products involve unlawful activity, gaming, and are not in the public interest. Kalshi sued and has thus far prevailed in court.
“The CFTC’s order exceeded its statutory authority,” Judge Jia Cobb wrote in September. “Kalshi’s contracts do not involve unlawful activity or gaming. They involve elections, which are neither.”
The CFTC is appealing the lower-court decision. In a reply brief filed earlier this month, the regulator said that once the D.C. appeals court lifted an administrative stay in October, "Kalshi promptly turned its futures exchange into an online casino."
“Kalshi persists in claiming that ‘[e]lection prediction markets are … for hedging economic risks associated with politics’ … , but its actions show the company has never been serious in that assertion,” the CFTC argued. “The Congressional Control Contracts were a Trojan horse to facilitate Kalshi’s transformation into a large-scale election gambling market, with the appearance of federal imprimatur, but without the pretense of any relationship to ‘hedging economic risks’ or consistency with the CEA’s purposes.”
The CFTC wants the lower decision reversed, saying the district court “erroneously accepted” Kalshi’s interpretations, “and left the Commission holding the bag as a new federal gambling regulator and potential election cop.”
So easy a Congress could do it
Kalshi said in a brief in November that Congress could "easily" make election-based contracts subject to CFTC by tweaking the law, but noted it has not yet done so.
“Absent such an amendment, the CFTC’s efforts to rewrite the statute are futile,” the brief stated. “The Congressional Control Contracts do not involve ‘unlawful activity’ or ‘gaming’ any more than they involve ‘war,’ ‘assassination,’ or ‘terrorism.’”
Oral arguments for the Kalshi appeal are scheduled for Jan. 17. Again, though, there is another venue where the election betting fight could continue.
While the CFTC is duking it out with Kalshi in court, it has also proposed a specific rule that would outlaw election betting and other contracts. Feedback from the public and the industry was collected over the summer.
The rule has not been finalized, but it is out there.
“In any event, litigation here may prove to have been a side-show, with the Commission seemingly determined to move forward with a ban,” Orrick lawyer Behnam Dayanim wrote in October. “The next step may be the (inevitable?) challenge to whatever rule the Commission adopts.”
