Federal Court Lifts Ban, Greenlights Election Betting

Step right up and place your bets. A federal judge has cleared a path for Americans to gamble cash on the upcoming elections.

On Thursday, US District Court Judge Jia Cobb at Washington lifted a ban on election betting in a case against Kalshi, a New York-based startup that focuses on prediction markets, according to the Associated Press. The ruling lifted a ban placed on the company last year by the Commodity Futures Trading Commission.

An hour after the ruling was issued, Kalshi offered an event contract, in which wagers could bet on which political party would take control of Congress.

Millions have been spent already on bets on the November elections, but were made in a gray area of legality. Judge Cobb’s decision made the ambiguity clearer with a temporary lift of the ban.

“The Kalshi community just made history, and I know we are only getting started,” co-founder of the company, Tarek Mansour, said in response to the ruling. “Now is finally the time to allow these markets to show the world just how powerful they are at providing signal amidst the noise and giving us more truth about what the future holds.”

Kalshi offers event contracts, which are financial options with a binary choice – picking one or the other – for a predetermined payout if the outcome is in the participant’s favor. Kalshi’s latest congressional race event contract will pay $154 for every $100 bet placed on the Democratic party winning.

It was not immediately clear if Kalshi would offer more event contracts, including for the presidential race. Previously, they have offered yes or no positions on political topics such as whether a new Supreme Court justice would be confirmed, if a government shutdown would occur by year’s end, or if President Biden’s approval rating would be above or below a certain level.

Since yesterday’s ruling, sportsbooks and online casinos have not offered similar bets for congressional or senate races.

The political wagering may not last for long as the CFTC, which had blocked Kalshi last year, has said it would appeal the ruling citing the potential for maliciously influencing the election results. The CFTC claims it would undermine what is already a fragile confidence from the public in the voting process.

“These contracts would give market participants a $100 million incentive to influence the market on the election. There is a very severe public interest threat,” an attorney for the CFTC, Raagbee Beri, said. “Somebody puts out misinformation about a drought, that a drought is coming. That could move the market on the price of corn. The same thing could happen here.”

“The commission is not required to suffer the flood before building a dam.”