A federal judge just opened Pandora’s box by allowing betting on U.S. election results – a move that could gamble away the integrity of our democracy.
At a Glance
- People began betting on which political party would win control of Congress in the November elections after a judge’s ruling.
- New York startup company Kalshi started taking bets on the outcome of the November congressional elections.
- U.S. District Court Judge Jia Cobb’s ruling allowed Kalshi to offer prediction contracts nationwide.
- The Commodity Futures Trading Commission (CFTC) plans to appeal the ruling, citing concerns about election manipulation.
- Kalshi has not disclosed if it will offer bets on other political events, such as the presidential race.
Judge’s Ruling Unleashes Election Betting
People began betting on which political party would win control of Congress immediately after U.S. District Court Judge Jia Cobb handed down a controversial ruling. This decision allows New York startup Kalshi to take bets on the outcome of the November congressional elections.
Kalshi, a startup, has seized this opportunity to launch prediction contracts in a nationwide rollout, effectively legalizing election betting across the United States. It’s a historic shift that has aroused significant controversy and debate.
Federal judge clears way for betting on U.S. elections in predictions market case https://t.co/qT99YjgUEg
— Axios (@axios) September 12, 2024
Potential Election Manipulation Concerns
The Commodity Futures Trading Commission (CFTC) has announced its intention to appeal Cobb’s ruling. The agency cited potential risks of election manipulation and raised concerns that these betting markets could undermine the democratic process.
Better Markets, a nonprofit organization, also voiced worries that this development could harm public trust in both financial markets and democracy. Their critique underscores the critical need to scrutinize the implications of such betting activities. “a dangerous move that opens the floodgates to unprecedented gambling on U.S. elections, eroding public trust in both markets and democracy.”
Kalshi’s Response and Future Plans
Kalshi has not yet disclosed whether it will offer bets on other political events, such as the upcoming presidential race, but the implications of their current offerings are significant. Their betting platform allows for yes-no positions on various political topics, and they’ve already seen substantial activity in the market.
The prices for these predictive contracts varied, providing specific examples for bets on Senate and House control.
“The commission lost, fair and square, on the law,” Kalshi wrote in a court filing, arguing against the CFTC’s decision to block election betting markets.
Kalshi aims to operate under government regulation, contrasting with foreign companies that accept bets on U.S. elections without formal approval. The startup intends to harness this regulatory compliance to build trust and credibility in their election betting marketplace.
Tarek Mansour, Kalshi’s co-founder, expressed optimism about the future: “The Kalshi community just made history, and I know we are only getting started.”
A federal judge cleared the path for Americans to use derivatives to bet on events such as the outcome of US elections, dealing another blow to the regulator overseeing the market https://t.co/id5XXqbitl pic.twitter.com/1pitGd6xB5
— Reuters Legal (@ReutersLegal) September 12, 2024
A Battle Over Democracy’s Integrity
Election bets went live shortly after Judge Cobb’s ruling, marking the first time in nearly a century that Americans could legally wager on election outcomes. However, the CFTC is expected to appeal to a Washington D.C. circuit court to overturn this ruling, citing serious public interest threats.
“These contracts would give market participants a $100 million incentive to influence the market on the election,” said Better Markets, emphasizing the severe public interest threat.
The court’s task was to determine Congress’s intent rather than conducting a public interest review, according to Judge Cobb. In her memorandum, she clarified, “Kalshi’s contracts do not involve unlawful activity or gaming. They involve elections, which are neither.”
Sources:
- Federal Judge Clears Path for Americans to Bet on Election Outcomes
- Money rolls in on US election bets after judge clears the way
- Court could clear the way for Americans to legally bet on U.S. elections
- Money rolls in on US election bets after judge clears the way
- This case is not about whether the court likes Kalshi’s product or thinks trading it is a good idea.
