U.S. Election Betting: Kalshi Preps Presidential Prediction Markets After Re-Launching Congressional Contracts

With a month to go before the U.S. election, prediction market Kalshi resumed listing its contracts on which party will control each house of Congress after an appeal court lifted its order pausing the activity.

The company is also preparing to list a contract on the presidency, according to a regulatory filing late Wednesday. Another U.S.-regulated prediction market, Interactive Brokers' ForecastEx, is getting ready to launch congressional and presidential markets, according to its filings.

On Wednesday, the U.S. Court of Appeals for the District of Columbia denied a motion by the Commodity Futures Trading Commission to halt the contracts pending the agency's appeal of the case it lost to Kalshi in a lower court last month.

"The Commission has failed to demonstrate that it or the public will suffer irreparable injury absent a stay pending appeal, and therefore its motion for a stay is denied without prejudice to renewal should substantiating evidence arise," wrote Circuit Judge Patricia Millett. "The administrative stay is hereby dissolved."

Apparently emboldened by the decision, Kalshi self-certified the contract "Will pres candidate or another party Representative win the Presidency by being the first inaugurated as President for the year Term of Office?" with the CFTC, according to a notice on the regulator's website. Self-certification is the process whereby entities regulated by the CFTC list products without the agency's prior approval.

Kalshi co-founder Luana Lopes Lara also teased this market in a post on X.

A clock on Kalshi's website indicates the presidential contract will launch Thursday afternoon U.S. hours.

On the relaunched contract "Which party will win the Senate?" shares in the Republicans were trading at 75 cents Wednesday afternoon in New York and Democrats at 25 cents. Each share pays out $1 if the prediction comes true and zilch if it does not, so a 75 cent price means the market sees a 75% chance of the GOP taking control of the chamber.

A separate contract on control of the House of Representatives gives a 63% chance of the Democrats regaining it and 37% for Republican retaining it.

Kalshi was until recently the sole U.S.-regulated prediction market until ForecastEx joined the ranks in June. The unit of Interactive Brokers self-certified congressional control contracts, a presidential contract, and one on individual Senate races, according to its Wednesday filings with the CFTC.

A long battle

Kalshi sued the CFTC last year after the agency denied its application to list election contracts, on the grounds that they constituted gaming and would be contrary to the public interest.

Following its long-sought victory in the lower court in September, Kalshi listed the contracts on Sept. 13. They traded for only a few hours before the appeals court granted an administrative stay, which it lifted Wednesday.

"While the question on the merits is close and difficult, the Commission cannot obtain a stay at this time because it has not demonstrated that it or the public will be irreparably harmed while its appeal is heard," Judge Millett wrote. "That failure is fatal to the Commission’s stay request because a showing of irreparable harm is a necessary prerequisite for a stay."

Dwarfed by Polymarket

While it's been fighting the agency in court, New York-based Kalshi, which settles bets in dollars, has watched crypto-powered rival Polymarket, which is barred from doing business in the U.S., nevertheless rack up record volumes during this election year. Over $1 billion alone has been staked on Polymarket's contract on who will win the presidency.

Volumes were comparably modest Wednesday for Kalshi's relaunched Congressional contracts, which had 45,000 contracts traded (worth as much in dollar payouts) for the Senate and $25,000 for the House.

Kalshi caters to institutional investors, and one of the objections to the Congressional contracts throughout the court case was that they allow positions as large as $100 million, which critics said would create strong financial incentives to interfere with elections.

Regulation pending

The CFTC has separately been considering, but has not finalized, a proposed rule that would ban election betting at all the futures exchanges on its watch. In her order Wednesday, Judge Millett suggested that rulemaking was the one way the agency could stop election betting at federally regulated futures exchanges.

"[I]f the Commission felt the risks of election contracts were as concrete and pressing as it argues here, it has long had—and still has—the power to forbid them on the exchanges it regulates," she wrote. "Specifically, the Special Rule [in the Commodity Exchange Act] empowers the Commission to find through a formal rule or notice-and-comment rulemaking that certain types of event contracts—such as election contracts—are 'contrary to the public interest' and to forbid them."

In its arguments before the court, the CFTC warned election contracts would incentivize the spreading of misinformation, and cited as evidence of the risks an apparently fake poll from 2017 that showed the rapper Kid Rock leading Sen. Debbie Stabenow in the 2018 Michigan Senate seat race. (He didn't run, and she won reelection.)

"Yet in the seven years since the fake Kid Rock poll was used, the Commission has not invoked the very tool Congress gave it to head off such harms," Judge Millett wrote Wednesday.

UPDATE (Oct. 2, 2024, 15:10 UTC): Adds quotes from judge's order.

CORRECTION (Oct. 2, 2024, 16:24 UTC): Corrects time element throughout (order was issued Wednesday, not Tuesday).

CORRECTION (Oct. 2, 2024, 17:08 UTC): Corrects outdated information. Kalshi is no longer the "sole" U.S.-regulated prediction market, now that Interactive Brokers' ForecastEx has opened.

UPDATE (Oct. 2, 2024, 21:15 UTC): Updates headline, subheadline and text throughout to reflect that Kalshi's contracts have resumed trading.

UPDATE (Oct. 2, 2024, 22:51 UTC): Updates with new information about Kalshi's forthcoming presidential contract.

UPDATE (Oct. 2, 2024, 23:34 UTC): Updates with new information about Interactive Brokers' forthcoming markets.

UPDATE (Oct. 3, 2024, 12:18 UTC): Updates with new timing details on Kalshi presidential contract.