A group of heavy hitters in Washington is urging regulators to legalize American political betting in races such as the upcoming midterm elections and the once-every-four-years presidential election.
Insiders, business moguls, and economists are among those comprising the group. They are asking the Commodity Futures Trading Commission (CFTC) to sign and enact a plan from prediction market provider Kalshi, which would allow for political betting in multiple facets.
concerns that passing such measures would morph important political battles into simple gambling
The CFTC is mulling the proposition this week. There have long been concerns that passing such measures would morph important political battles into simple gambling races. Kalshi is prepared to fight for change, if necessary.
American political betting on the menu?
Political betting has a strong history in other countries despite still being a niche market in America. For example, sportsbooks in the UK provided odds on when former prime minister Liz Truss would step down from office – the answer was only 45 days after her first day.
As US groups aim to move towards this model, Kalshi believes that the American regulator does not have the power to restrict political gambling.
“The law is very clear,” said Kalshi co-founder and CEO Tarek Mansour. “It would be illegal to block these markets.”
Many political wagers made by people in the US are placed with offshore, unregulated sportsbooks, which most states are trying to get rid of. These sites are often unregulated and don’t offer any protection to consumers, leaving them exposed to the possibility of fraud and other criminal acts. Betting exchange PredictIt, which is similar to Kalshi, has gained popularity in recent years, though it may be on its way out.
the CFTC has an inherent responsibility to pursue “responsible innovation”
Kalshi believes that the CFTC has an inherent responsibility to pursue “responsible innovation,” which would mean adding political gambling to the betting market. Market traders can already bet on aspects of the economy such as gas prices and the inflation index.
The proposal has been met with heavy support from influential businessmen. Intercontinental Exchange, which owns the NYSE, said that Kalshi’s proposition does not represent gambling, while Sacramento Kings co-owner Vivek Ranadivé has also voiced support.
The position that Kalshi is pushing is not one without support or merit. Former Obama White House economist Jason Furman said that he and other teams used political prediction markets to assess the implications of future decisions.
“They have a very good track record of being better than polls and better than political geniuses,” Furman said. “They’re a much purer way for people in business, government and interested parties to understand what might happen.”
concerns that political markets could become a new hub for day traders
However, there are concerns that political markets could become a new hub for day traders. The timing is also questionable, given the exasperated inter-party relations and a fraying relationship between the youth and the establishment.
Former President Donald Trump also perpetuated the false idea that the election was fraudulent with constant calls for recounts and suggestions that he would refuse to leave office if he lost (and still does spread the “Big Lie” on a daily basis). As a result, Better Markets CEO Dennis Kelleher said that political betting could “raise further questions about our elections and our Democracy.”
In 2012, the CFTC denied an application from another company to regulate political event betting on the ground that it was not in the best interest of the public and constituted gambling. However, Kalshi’s advisors believe that the CFTC misinterpreted the laws.
“[Creating political betting] may make some people uncomfortable, but that’s not the basis for failing to follow the law and regulations,” said Jeff Bandman, a former CFTC working with Kalshi.