ATLANTIC CITY, N.J. (AP) — People began betting Thursday on which political party would win control of Congress in the November elections after a judge’s ruling allowing the wagers — the only ones to be legally approved by a U.S. jurisdiction.
New York startup company Kalshi began taking what amounts to bets on the outcome of the November congressional elections after a judge refused to block them from doing so.
The ruling by U.S. District Court Judge Jia Cobb in Washington enabled the company, at least temporarily, to offer prediction contracts across the country— essentially yes-or-no bets — on which party will win control of the Senate and the House in November.
“The Kalshi community just made history, and I know we are only getting started,” said Tarek Mansour, a co-founder of the company. “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.”
But the activity could prove short-lived. The Commodity Futures Trading Commission, an independent federal body which last year prohibited the company from offering such bets, said it would appeal the ruling as quickly as possible, citing the possibility of people trying to manipulate the election for financial purposes.
Kalshi did not say whether it intends to offer bets beyond the ones posted Thursday for congressional races, including potentially taking bets on the presidential race.
It also was not immediately clear whether sports books or online casinos would seek to offer similar political bets in light of the ruling.
Prices on Kalshi’s so-called predictive contracts varied throughout the early afternoon. As of mid-afternoon, a bet on the Republicans to win control of the Senate was priced at 76 cents; a $100 bet would pay $129. A bet on the Democrats to win control of the House was priced at 63 cents, with a $100 bet paying out $154.
Better Markets, a nonprofit organization that says it advocates for the public interest in financial markets, called the development “a dangerous move that opens the floodgates to unprecedented gambling on U.S. elections, eroding public trust in both markets and democracy.”
Contrasting his client with foreign companies who take bets from American customers on U.S. elections without U.S. government approval, Roth said Kalshi is trying to do things the right way, under government regulation.
“It invested significantly in these markets,” he said during Thursday’s hearing. “They spent millions of dollars. It would be perverse if all that investment went up in smoke.”
But Raagnee Beri, an attorney for the commission, said allowing such bets could invite malicious activities designed to influence the outcome of elections and undermine already fragile public confidence in the voting process.
“These contracts would give market participants a $100 million incentive to influence the market on the election,” she said. “There is a very severe public interest threat.”
She used the analogy of someone who has taken an investment position in corn commodities.
“Somebody puts out misinformation about a drought, that a drought is coming,” she said. “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.”
Thursday’s ruling will not be the last word on the case. The commission said it will appeal on an emergency basis to a Washington D.C. circuit court, and asked the judge to stay her ruling for 24 hours. But the judge declined, leaving no prohibition in place on the company offering election bets, at least in the very near term.
The company already offers yes-no positions on political topics including whether a government shutdown will happen this year, whether a new Supreme Court justice will be confirmed this year, and whether President Joe Biden’s approval rating will be above or below a certain level by the end of the year.
The Kalshi bets are technically not the first to be offered legally on U.S. elections. West Virginia permitted such bets for one hour in April 2020 before reversing itself and canceling those betting markets, deciding it had not done the proper research beforehand.