Kalshi Launches US Election Betting Contracts After Court Win

Kalshi’s Breakthrough: Event Contracts for US Presidential Elections

In a landmark decision for political event markets in the United States, Kalshi, a derivatives exchange, has introduced event contracts that allow users to bet on various outcomes of upcoming elections. This development follows a substantial court victory against the Commodity Futures Trading Commission (CFTC) in September 2023, which cleared the way for Kalshi to legally trade on aspects of the US presidential election.

What are Event Contracts?

Event contracts are binary options that depend on specific political event outcomes. For instance, participants can wager on whether a candidate will become the presidential nominee of their party or if a certain political party will secure a Senate seat for a set term. Kalshi has self-certified over a dozen such contracts concerning the upcoming presidential election, and users can now engage in trading on matters like margin of victory and state winners.

Legal Background and Implications

Kalshi's recent legal triumph is significant, as it represents the first time an election prediction market has been permitted to operate legally in the United States. This could pave the way for similar platforms, including decentralized entities like Polymarket, to establish themselves within this emerging market.

After winning a lawsuit against the CFTC, which had previously prohibited Kalshi from offering political event contracts, the court ruled in favor of Kalshi on October 2, 2023. Although the CFTC has appealed this ruling and sought a temporary injunction to halt Kalshi’s contract offerings, the exchange remains optimistic about expanding its services.

Comparative Popularity: Kalshi vs. Polymarket

Despite Kalshi's forward momentum, it struggles to compete with Polymarket, which has become the frontrunner in the election betting space. As of October 2, Polymarket reported over $1 billion wagered on the upcoming November 2023 presidential election. In juxtaposition, Kalshi's corresponding event contracts garnered approximately $775,000 in trading volume. This marked difference illustrates the competitive nature of the election betting market.

Concerns and Perspectives

There have been expressed concerns by the CFTC regarding the potential impact of election prediction markets on the integrity of electoral processes. Kalshi's operations could raise questions about the ethical considerations of betting on political outcomes. However, industry experts argue that these markets can often reflect public sentiment more accurately than traditional polling methods.

Harry Crane, a statistics professor at Rutgers University, highlighted in an August comment letter to the CFTC that event contract markets represent a valuable public good. He noted that there is no substantial evidence indicating that such markets manipulate public opinion or engage in misuse for unethical purposes.

Conclusion

The introduction of event contracts by Kalshi ushers in a new era for political betting in the United States. As users explore this innovative platform, the implications for the electoral process—and the broader betting market—will be closely observed. It remains to be seen how Kalshi can increase its user engagement amidst strong competition while navigating the regulatory landscape established by the CFTC.