Are You Ready to Bet on U.S. Elections? A Judge’s Ruling Opens the Door
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.
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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 2021 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.
Write to Alexander Osipovich at alexo@wsj.com