Kalshi, a financial exchange platform, opened the first U.S.-based betting market on American elections on Thursday after a federal judge shut down regulators’ attempts to shut it down.
The Commodity Futures Trading Commission feverishly worked to try to re-cork the bottle, asking an appeals court to step in and overrule the judge.
But Kalshi moved quickly to open up the market, offering initial bets on which party will win control of the House and Senate in November’s elections.
The CFTC said allowing Americans to bet on the elections risked undermining confidence in government, and it said it had the regulatory authority to prevent the market from opening.
But U.S. District Judge Jia Cobb said the CFTC was overstepping its powers.
“Kalshi’s contracts do not involve unlawful activity or gaming. They involve elections, which are neither,” she wrote.
“This case is not about whether the Court likes Kalshi’s product or thinks trading it is a good idea. The Court’s only task is to determine what Congress did, not what it could do or should do. And Congress did not authorize the CFTC to conduct the public interest review it conducted here,” Judge Cobb concluded.
She ruled last week against the CFTC, but didn’t deliver her written opinion until Thursday.
The federal agency had asked her to delay the effect of her ruling for two weeks to give it time to appeal, but Judge Cobb rebuffed that entreaty Thursday.
The CFTC quickly filed its appeal anyway, but no action has been taken as of Thursday afternoon.
By then, Kalshi moved to open trading.
“Today marks the first trade made on regulated election markets in nearly a century,” said Tarek Mansour, a co-founder of Kalshi.
“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,” Mr. Mansour said.
Outfits outside the U.S. have offered betting on American politics for decades but Kalshi becomes the first in the U.S.
Initial betting put the GOP as the favorites to win the Senate, and suggested Democrats were favored to win the House. That would be a reversal from the current state of control in both chambers.
Kalshi said it will judge the winners based on the party of the speaker of the House and the Senate president pro tempore as of Feb. 1. Bets will be paid out that day.
Betting markets have exploded in recent years with companies offering “event contracts” on all sorts of issues and questions.
Besides the sporting elements, Kalshi said it’s offering people a way to hedge risks.
It hypothesized about betting on a hurricane season. A hotel operator might bet in favor of a rough season to offset losses that could come from fewer tourists, while a construction company might bet in favor of a weaker season to offset a lower rate of rebuilding work if hurricanes didn’t materialize.
The CFTC said betting on politics involves “gaming,” which would give the agency the power to do a special review.
Judge Cobb, a Biden appointee to the district court in Washington, D.C., rejected the CFTC’s claim that Kalshi implicates gaming.
“Kalshi’s event contracts ask buyers to take a yes/no position on whether a chamber of Congress will be controlled by a specific party in a given term. That question involves (relates to, entails, has as its essential feature, or any other iteration of the word) elections, politics, Congress, and party control; but nothing that any Party to this litigation has identified as illegal or unlawful activity. Nor does that question bear any relation to any game — played for stakes or otherwise,” she wrote.
• Stephen Dinan can be reached at sdinan@washingtontimes.com.