A federal judge has cleared the way for betting on election results in the United States for the first time in the modern era, overturning a ban imposed on gambling companies by the Commodity Futures Trading Commission, a financial regulator.
In November, the CFTC was defendant In the District of Columbia, New York-based Kalshi operates a prediction market that allows users to bet on the outcome of various events, from the volume of recorded bird flu cases to the number of cars produced by Tesla. Kalshi filed a lawsuit to overturn a CFTC Decision preventing him from offering bets on whether the Democratic or Republican party would control both houses of Congress.
On September 6, Judge Jia Cobb ruled In Kalshi’s favor, the CFTC ban was overturned. At a hearing on Thursday, the judge rejected a motion for a delay intended to buy time for the CFTC to appeal, meaning the betting can now begin.
The debate over whether election betting should be allowed in the United States goes back decadesThe practice is currently illegal under the laws of many U.S. states. like Texas and Snowfallbut not everywhere.
The CFTC has so far refused to to grant gambling platforms a license to offer odds on election results, which amounts to a de facto ban. In May, the agency Proposal for new rules that would make election betting explicitly illegal, classifying it as a type of gambling, a practice over which it has some jurisdiction. The proposal won support from some Democratic senators, including Elizabeth Warren of Massachusetts and Jeffrey Merkley of Oregon, who in August signed an agreement open letter supporting the CFTC plan.
Organizations lobbying against legalized election gambling say the practice would encourage interference by bad actors. “The American people’s trust in our election system is at an all-time low. The last thing we need is for people to feel incentivized to interfere with the election process,” says Dennis Kelleher, president and CEO of the nonprofit Better Markets. “There can be no question that when there are hundreds of millions of dollars at stake, people will feel incentivized to engage in election-interfering behavior.”
The CFTC did not respond to WIRED’s questions, but in a previous statementIts president, Rostin Behnam, outlined the rationale for his proposed ban. “Contracts involving political events ultimately commodify and degrade the integrity of the uniquely American experience of participating in the democratic electoral process,” he said.
But in its suit, Kalshi argued that election-related event contracts — the type of betting instrument in question — are a valuable tool for companies hoping to hedge against a political outcome that could go unfavorably to them. The company also argued that the data produced by this type of betting activity can be used as a valuable alternative to traditional polling. “You get more truth from these markets,” says Tarek Mansour, Kalshi’s co-founder. “They do a better job of aggregating prevailing wisdom.”