Big-betting "whales" are beginning to migrate from the casinos, sportsbooks, and stock markets of the world to a new habitat: election-wagering sites.
One of the budding avenues for legal election wagering in the U.S. is indeed seeing some whales surface on its platform, and the company is getting the word out as an online sportsbook would.
Prediction market Kalshi reported on Friday that one of its users placed a $500,000 bet on Democrat Kamala Harris to win the U.S. presidential election this year.
The wager would return the punter more than $1.2 million (their stake included) if the current veep (who is also currently the underdog in the race) wins the White House.
We don't know who placed the bet, but they certainly have deeper pockets than most.
"Previously, election hedging was a privilege reserved for large corporations and the wealthy elite," Kalshi CEO Tarek Mansour wrote recently. "But thanks to Kalshi, everyone has the right to protect themselves from the uncertainty inherent in the democratic process. From business owners concerned about new regulations to students worried about the status of student loan forgiveness, to retirees anxious about healthcare changes, Kalshi gives individuals the chance to hedge against the outcomes that matter most to them.
🚨BREAKING: Over $500,000 was just placed on Kamala Harris to WIN the Presidential Election pic.twitter.com/g5gkoA24AP
— Kalshi (@Kalshi) October 18, 2024
If this all feels a bit familiar, it's because this sort of publicity is similar to what sportsbooks have done when a big bet comes in — let's call it the "Mattress Mack" effect.
Yes, maybe it's old hat now, but legal sportsbooks have not been shy about letting the public know when a noteworthy wager comes in. DraftKings, for example, reported a $40,000 moneyline bet on the New York Jets yesterday that went up in smoke at the hands of the Pittsburgh Steelers.
This is because big bets can be interesting, and get the social media masses going. There is even a "Sporttrade Whale Tracker" account on Twitter/X that posts the biggest trades on the sports betting and exchange wagering app.
Thar she grows
The difference here is there are now whales who are focused on the much more sensitive area of politics, and who will be the next person to inherit what is arguably still the most powerful office in the world. Moreover, the biggest bets may still be yet to come.
“Because of Kalshi’s 100% legal status, we are able to work with well-known market makers such as Susquehanna International Group (SIG),” Mansour wrote. “They are expected to provide millions of dollars in liquidity, ensuring that traders can easily enter or exit trades as needed. Best of all, individuals can trade up to $7 million per contract, while eligible contract participants (ECPs) such as corporations and investment firms can trade up to $100 million.”
The “legal status” Mansour wrote about is still being fought over. The U.S. Commodity Futures Trading Commission has tried to prohibit Kalshi from offering election-related contracts but has thus far struck out in court.
And although the CFTC isn’t done appealing, Kalshi has taken its current legal cover and run with it. The company has taken millions of dollars in action on this year’s election and is poised to take millions more.
Kalshi's contracts are also constantly being bought and sold, and its website discloses the trades in real time. For example, while I was typing this sentence, someone bought 431 contracts of "yes" Donald Trump will win the election for 58 cents apiece. In other words, an approximately $250 wager could win a bettor another $181 or so if Trump is victorious.
Free Milly
Kalshi reported that more than $42 million had been traded in its presidential election market as of Monday evening. That will doubtlessly increase as we get closer and closer to the election on Nov. 5. More whales could make a splash between then and now.
The numbers also speak to the interest in election wagering in the U.S., as Kalshi is doing what online sports betting sites in the country cannot, which is book the vote. Although the likes of BetMGM, DraftKings, and FanDuel are taking bets on the election in the Canadian province of Ontario, they are not in the U.S., where the practice is widely prohibited.
That has left Kalshi as one of the go-to destinations in the U.S. for legal election wagering. While there are also “experimental” prediction markets PredictIt and Iowa Electronic Markets, the limits at those sites are lower. PredictIt, for example, caps investment in any individual contract at $850.
Trading platform Interactive Brokers has also launched a similar product, called "Forecast Contracts." The contracts cover similar territory as Kalshi, such as whether Harris or Trump will win the election. And, again like Kalshi, those markets are starting to pick up.
“We’ve seen substantial demand for election-focused contracts on our platform in just a short time,” said Thomas Peterffy, founder of Interactive Brokers, in a statement to CNBC earlier this month. “This interest underscores the growing relevance of political prediction markets.”
Nuke the whales?
Not everyone is thrilled about the growth of political prediction markets.
One of the reasons why the CFTC sought to block Kalshi from offering election-related contracts was concern about attempted manipulation. Seeing massive bets come in on the presidential campaign may not ease the regulator's concerns.
“The Commission noted the difficulty of guarding against misinformation and manipulative activity because the Contracts have no underlying cash market, unlike other commodity markets, and instead the price forming information is driven largely by opaque and unregulated sources such as polling and voter surveys,” the regulator said in a recent court filing.
Mack Caesar is back for the MLB Postseason!@MattressMack placed $1M on the Astros to win the World Series at +1100 last week 🏆
— Caesars Sportsbook & Casino (@CaesarsSports) October 5, 2023
Potential win: $11M 💰 pic.twitter.com/ZSO8F1DX3H
There have been some big bets in previous elections that raised eyebrows, such as a trader who bet millions on Mitt Romney in 2012 in what may have been an attempt to affect public opinion.
More recently, $30 million or so in cryptocurrency was reportedly bet on Trump by a handful of possibly connected accounts on Polymarket. The New York-based prediction market says it does not accept action from Americans, but its contract prices have been closely followed this election season, including by Elon Musk.
Trump is now leading Harris by a fair margin, at least if you go by the prices at Kalshi and Polymarket. As of Monday afternoon, Trump's "yes" contract at Kalshi was trading at 58 cents and Harris' at 44 cents.
But Mansour recently took to Twitter to push back on any claims that the markets are being manipulated in Trump's favor. To that end, the Kalshi CEO presented data showing the median bet size for Harris on their site is larger than that of Trump.
“There are simply more traders betting on Trump than Kamala,” Mansour wrote on Sunday. “Approximately 60% of traders favor Trump, while 40% favor Kamala.”
