A federal appeals court in Washington, DC has removed a significant barrier for US gamblers, potentially allowing them to place bets on political outcomes, including the upcoming contest between former President Donald Trump and Vice President Kamala Harris.
This ruling marks a major shift in how political betting could be viewed legally in the US.
Court approves political betting markets
On Wednesday, a three-judge panel ruled that the Commodity Futures Trading Commission (CFTC) had failed to prove that allowing betting markets to operate during an ongoing legal dispute would irreparably harm consumers.
This decision paves the way for regulated exchanges to offer political betting markets to US participants.
At the center of the case was Kalshi, a New York-based betting platform that sued the CFTC after it was denied clearance to offer bets on control of Congress following the upcoming election.
The court’s decision could open doors to a wide array of political betting in the future, as noted by a legal briefing from WilmerHale.
WilmerHale attorneys wrote:
It would allow regulated exchanges like Kalshi to offer event contracts based on political outcomes to US market participants and could pave the way for a broader range of political prediction contracts in the future.
Kalshi’s response and growing interest in political betting
Kalshi founder Tarek Mansour welcomed the court’s ruling on X (formerly Twitter), writing, “US presidential election markets are legal. Officially. Finally.”
US presidential election markets are legal. Officially. Finally.
Kalshi prevails.
While the company has yet to announce when political betting will officially begin, the ruling represents a significant milestone for Kalshi, which has previously offered non-political event contracts, such as those related to Federal Reserve decisions or new product launches from companies like Nintendo.
Following the ruling, other platforms have shown interest in offering political betting.
Interactive Brokers, which had previously planned to allow election betting, announced that it could begin accepting political wagers as early as Thursday afternoon, pending regulatory approval.
The legal battle began in September 2023, when the CFTC rejected Kalshi’s request to allow its users to trade “event contracts” predicting which party would control Congress.
Last month, a district court judge overturned that decision, leading to the CFTC’s appeal. While the case continues, the appeals court’s ruling allows the markets to operate during the legal proceedings.
CFTC raises concerns over election integrity
The CFTC’s primary argument against political betting was the potential for manipulation.
The agency warned that allowing bets on elections could incentivize campaigns or other groups to falsely place favourable bets to boost a candidate’s perceived popularity.
This could influence public opinion and sway the election.
The appeals court, however, found that the CFTC did not sufficiently demonstrate these risks.
“The commission has failed to show that these dangers are adequately substantiated,” the judges wrote in their ruling, allowing the betting markets to move forward while the case continues.
Despite the ruling, critics of political betting have voiced concerns about its potential impact.
Stephen Hall, legal director of the nonprofit Better Markets, expressed alarm, stating that this could undermine election integrity in the US.
“Gambling on elections will create powerful new incentives for bad actors to interfere with our elections and sway voters outside of the democratic process,” Hall said in a statement.
There is no way to undo the potential damage to the public interest of allowing bets in the final weeks of an election year.
The road ahead for US political betting
With the court’s decision, the future of political betting in the US seems more viable than ever.
However, questions remain about how these markets might affect the fairness of elections, and whether further regulation will be needed to prevent potential manipulation.
Kalshi, along with other betting platforms, stands to gain significantly from this decision, but the ongoing legal and regulatory landscape will ultimately shape how these markets are governed.
As the 2024 presidential election approaches, political betting could soon become a major part of the US betting industry.
Whether political betting becomes a permanent fixture or a temporary trend will likely depend on how the legal battles continue to unfold and how regulators, lawmakers, and the public react.
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