In a groundbreaking move for the derivatives market, Kalshi, a derivatives exchange, has launched event contracts that allow users to bet on the outcomes of United States elections. This development follows a significant court victory in September that cleared the way for the platform to engage in election prediction trading.
Kalshi’s founder, Tarek Mansour, revealed this new opportunity through a post on the X platform dated October 7, highlighting that users can now legally trade on various aspects of the US presidential election, including metrics such as the margin of victory and the winners of individual states. This initiative marks a historic first, allowing an election prediction market to operate within the US, thereby paving the way for other platforms, including emerging Web3 ventures like Polymarket, to explore similar avenues. Kalshi has successfully self-certified over a dozen election betting contracts, according to the Commodity Futures Trading Commission (CFTC).
These contracts operate as binary options with payouts linked to the outcomes of specific political events. For instance, users can wager on whether a specific candidate will secure the presidential nomination for their respective political party in a given election year, or if a political party will win a Senate seat for a specified term.
The recent legal triumph for Kalshi came after the CFTC had initially barred the exchange from offering political event contracts. Following a favorable court ruling on October 2, Kalshi is now able to provide these contracts to participants. Although the CFTC has appealed this ruling and sought a temporary injunction to halt Kalshi from listing these contracts, the court upheld Kalshi's right to operate. Despite this landmark legal victory, Kalshi’s engagement in the market is notably less prominent compared to its competitor Polymarket.
As of October 2, Polymarket reported an impressive figure of over $1 billion wagered on the impending November US presidential election, whereas Kalshi's corresponding contracts have garnered roughly $775,000 in trading volume thus far. The CFTC has publicly articulated concerns regarding the potential implications of election prediction markets like Kalshi on election integrity.
Nonetheless, industry analysts counter that these markets may often provide a more accurate reflection of public sentiment compared to traditional polling methods. Harry Crane, a professor of statistics at Rutgers University, emphasized in an August correspondence to the CFTC that event contract markets represent a valuable public service.
He noted that there is no substantial evidence suggesting that these markets are subject to manipulation or are being misused for malicious intent. This dialogue indicates the ongoing debate and scrutiny surrounding the intersection of law, finance, and electoral integrity in the evolving landscape of political betting..