U.S. court opens door for more election betting this fall

Kalshi specializes in event contracts, which allow traders to wager money on the probability of certain occurrences — like the number of major storms this year, or the potential recipients of Oscar nominations for best actor. It took steps to wade into electoral politics in 2023, seeking that June to allow users to bet on which party would take control of Congress.

The site at the time proposed to permit certain established investors to stake up to $100 million on those bets, according to an application filed with the Commodity Futures Trading Commission, which regulates Kalshi as an exchange. In doing so, the company said it hoped to create a novel market — one that would enable major businesses or traders to hedge any political risks they might face depending on the future trajectory of Washington.

But the CFTC soon intervened, moving to block Kalshi from allowing election betting as part of a broad crackdown against the practice. In a statement explaining the agency’s move, Chairman Rostin Behnam said Kalshi’s proposal threatened to “reduce key facets of the democratic process to a source of revenue for some.”

The denial prompted Kalshi to sue the CFTC, and a federal judge this September ultimately sided with the company. Immediately, the CFTC returned to court, requesting an emergency halt to any new election wagering as the government prepares its appeal ahead of the election. But a federal appeals court in Washington denied that motion on Wednesday, potentially opening the door for betting to begin just as some voters receive their mail-in ballots.

Acknowledging the CFTC’s “understandable” concerns about election integrity, the judges ruled that federal regulators had not “substantiated” their claims that any harms “are likely to materialize” if Kalshi allows such wagers.

A spokeswoman for Kalshi did not immediately respond to a request for comment. It is unclear if the exchange still plans to allow massive bets on the 2024 election — or if it has changed the event contract it plans to offer.

But the company’s founder, Tarek Mansour, celebrated the decision earlier Wednesday on the social media site X.

The CFTC declined to comment.

Its defeat in court comes as regulators ready new rules that would broadly ban election-related betting on commercial exchanges under its watch. Citing a lack of staff and resources, the agency previously has warned it is unequipped to monitor political markets for fraud or manipulation.

The outcome troubled Democratic lawmakers and watchdog groups, including Better Markets, which had argued that election betting opens the door to manipulation — allowing malicious actors to try to influence voters’ decisions in pursuit of potential profits.

“When we reduce our democracy to a horse race for the ultrarich and huge corporations to bet on, we demolish the integrity of our democratic process and put corporate profits over people,” Sen. Jeff Merkley (D-Ore.) said in a statement. “This ruling comes almost 30 days before one of the most consequential elections in our nation’s history and opens the door to this terrifying practice.”