For the first time in contemporary history, a federal judge has allowed betting on the outcome of the U.S. election, overturning a ban on gambling companies imposed by the Commodities Futures Trading Commission, the financial industry regulator.
In November, the CFTC defendant in the District of Columbia by Modern York-based Kalshi, which runs a prediction market that lets users bet on the outcome of everything from the number of cases of bird flu recorded to the number of cars Tesla will produce. Kalshi filed a lawsuit seeking to set aside CFTC Decision preventing him from offering bets on which party, Democratic or Republican, will control both houses of Congress.
September 6 Judge Jia Cobb he ruled in Kalshi’s favor, overturning the CFTC’s ban. At a hearing Thursday, the judge denied a delay request aimed at buying the CFTC time to appeal, meaning betting can now begin.
The debate over whether election betting should be allowed in the US goes back decadesCurrently, this practice is illegal under the laws of many U.S. states, like Texas AND Nevadabut not everywhere.
CFTC so far he refused grant gambling platforms a license to offer odds on election results, effectively banning them. In May, the agency proposed new rules which would make betting on elections explicitly illegal, classifying it as a form of gambling, a practice over which it has some jurisdiction. The proposal has gained support from some Democratic senators, including Elizabeth Warren of Massachusetts and Jeffrey Merkley of Oregon, who co-signed the measure in August open letter support the CFTC plan.
Groups lobbying against legalized gambling say the practice would encourage interference by malicious actors. “Americans have very low confidence in our election system. The last thing we need is for people to be encouraged to interfere in the election process,” says Dennis Kelleher, president and CEO of the nonprofit Better Markets. “There’s no question that when hundreds of millions of dollars are at stake, people are going to be encouraged to engage in behavior that interferes with elections.”
The CFTC did not respond to WIRED’s questions, but in previous statementits chairman, Rostin Behnam, outlined the rationale for the proposed ban. “Contracts covering political events ultimately commodify and degrade the integrity of the uniquely American experience of participating in a democratic electoral process,” he said.
But Kalshi argued in his lawsuit that electoral event contracts—the type of betting instrument in question—are valuable tools for companies looking to protect themselves against an unfavorable political outcome. The company also argued that the data generated by such betting activities could be used as a valuable alternative to conventional polling. “You can extract more truth from these markets,” says Tarek Mansour, Kalshi’s co-founder. “They’re better at aggregating prevailing wisdom.”