A federal judge has cleared the way for betting on US election results for the first time in modern times, overturning a ban imposed on gambling companies by the Commodities Futures Trading Commission, a financial regulator.
In November, the CFTC was sued in the District of Columbia by New York-based Kalshi, which operates a predictions market that allows users to bet on the outcome of various events, from the number of recorded cases of bird flu to the number of cars produced. by Tesla. Kalshi filed a lawsuit seeking to overturn a CFTC ruling that prevented it from offering bets on whether the Democratic or Republican parties would win control of both houses of Congress.
On September 6, Judge Jia Cobb ruled in Kalshi’s favor, lifting the CFTC ban. At a hearing Thursday, the judge denied a motion for a delay meant to buy the CFTC time to appeal, meaning betting can begin.
The debate over whether election betting should be allowed in the US has been going on for decades. Today, the practice is illegal under the laws of many US states, such as Texas and Nevada, but not everywhere.
The CFTC has so far refused to grant gambling platforms a license to offer odds on election results, amounting to a de facto ban. In May, the agency proposed new rules that would make election betting outright illegal, classifying it as a form of gambling—a practice over which it has some jurisdiction. The proposal has drawn support from several Democrat senators—including Elizabeth Warren of Massachusetts and Jeffrey Merkley of Oregon—who in August signed an open letter endorsing the CFTC’s plan.
Organizations lobbying against the legalization of election betting say the practice will encourage interference by bad actors. “Americans’ trust and confidence in our election system is at an all-time low. The last thing we need is for people to be incentivized to disrupt the election process,” said Dennis Kelleher, president and CEO of nonprofit Better Markets. “There’s no doubt, when there are hundreds of millions of dollars on the line, people will be motivated to engage in conduct that interferes with the election.”
The CFTC did not respond to questions from WIRED, but in a previous statement, its chairman, Rostin Behnam, laid out the rationale for its proposed ban. “Contracts involving political events ultimately commoditize and diminish the integrity of the unique American experience of participating in the democratic electoral process,” he said.
But in its lawsuit, Kalshi argued that election-related event contracts—the type of betting instrument in question—are an important tool for businesses hoping to hedge against a potentially unfavorable political outcome. to them. The company also argued that the data produced by this type of betting activity could be used as a valuable alternative to traditional polling. “You get more facts from these markets,” says Tarek Mansour, cofounder of Kalshi. “They do a better job of integrating existing wisdom.”
