The first prediction markets election
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"Election markets are coming!" That was the message splashed across the prediction market Kalshi homepage on Monday, along with a note saying, "Election markets are now legal for the first time in 100 years."
Why it matters: At stake is the ability of the general public to profit from election outcomes — and, if you believe the U.S. government, the integrity of U.S. elections themselves.
State of play: Polymarket, a cryptocurrency-based events market that explicitly bans U.S. users, has already seen hundreds of millions of dollars bet on U.S. politics this year.
- A market with a legal green light could get much bigger.
What they're saying: Election markets — places where users can place bets on the outcome of elections — "could potentially be used in ways that would have an adverse effect on election integrity," per a motion filed Friday by the Commodities Futures Trading Commission.
- "Even a short listing" of election contracts, said the CFTC, could "undermine confidence in elections."
Felix's thought bubble: I grew up in the U.K., where betting on election outcomes has always been legal. No one believes those bets undermined anything.
Where it stands: Kalshi, a startup that enables placing cash bets on real-world events, prevailed over the CFTC in U.S. district court on Friday.
- The agency had forbidden Kalshi from offering a market betting on which party would control Congress in 2025; the startup then challenged the agency's authority to do so.
- The judge has not yet issued her opinion. Meanwhile, the CFTC requested an emergency stay, which the court has granted.
- A hearing has been scheduled for Thursday morning.
Zoom out: Other companies are likely to want to get in on election betting if the law looks clear.
- Sports betting is now legal in 38 states, and sports bettors with opinions about politics might also want to throw a few dollars down on the next president or House speaker.
- Kalshi has non-sports betting rivals, such as PredictIt and Polymarket (both of which have already run afoul of the CFTC).
Follow the money: Among events-based marketplaces, Polymarket has been the big winner of this election so far.
- $1.1 billion has been bet on Polymarket since June, according to Dune Analytics, and 88% of that has been political bets on the U.S. election.
Yes, but: Since Polymarket is blockchain-based, users need to get cryptocurrency and learn how to use it to place election bets.
- The site also blocks American users, so they need to find a way around that and risk being accused of breaking the law.
The bottom line: If there's $800 million of demand with all the friction involved in cryptocurrency transactions, there could be much more if election markets are legalized.
