Americans will decide by Nov. 5 who will serve as the country’s next president. But before millions head to the polls to cast their ballot on Election Day, millions of dollars are being wagered – legally in the United States – on whether former President Donald Trump or current Vice President Kamala Harris will take the oath of office on Jan. 20.
Kalshi, an online futures exchange, went live with its political markets this month after a federal appeals court denied a stay request by the Commodity Futures Trading Commission, a federal agency that oversees markets like Kalshi, to block trading while the court case continued. Both sides will continue to file documents with the U.S. Court of Appeals for the District of Columbia Circuit through December before a three-judge panel hears oral arguments.
Political betting or trading has long been popular at sportsbooks in Europe and even Canada. But offering wagers on events, like elections, is not allowed via Kansas sportsbook apps or from any other state that has licensed sportsbooks. However, PredictIt has been able for years to offer limited trading to Americans on such markets as the outcome of the presidential race through an agreement reached with the CFTC.
Kalshi sought approval for its markets two years ago and sued after the commission denied the company’s request.
‘Coin Flip With A Bias’
As of Wednesday morning – with millions having already voted early either in person or by mail – more than $106 million in shares have been traded on Kalshi’s main presidential market since it initially went live on Oct. 4. That was two days after the appeals court denied the stay. It’s likely trading will increase as Election Day draws nearer.
For perspective, this year’s Kentucky Derby generated a handle of $210.7 million. If trading were available for an entire election cycle, it could rival wagering for major sporting events such as the NCAA Tournament or the Super Bowl.
Traders buy shares at a cost between 1 and 99 cents per share, depending on the current market price. Shareholders of the correct outcome will receive $1 per share, with the remaining shares earning nothing. Currently, traders favor Trump to win the election, with his shares trading at 62 cents. Harris shares are at 38. Shares are also available for Robert F. Kennedy Jr., Jill Stein, Chase Oliver and Cornel West. Traders can purchase shares for those candidates at a penny each.
Just because the market has Trump shares priced at 62 cents each does not mean traders believe the former president will win by a 24-point margin. Instead, Kalshi Founder and CEO Tarek Mansour told CNBC in an interview Monday, that’s the actual chance, in percentage points, traders believe Trump has of winning the election.
“It’s a coin flip with a bias,” he said.
To put it in sports betting terms, Trump’s odds are currently around -163. That equates to a $62 winning wager generating a profit of $38 or a payout of $100. Based on Harris’ current price, her odds are +163. If Harris wins, traders who bought $38 worth of shares at the current price would receive $64 in profit or a payout of $100.
Mansour told CNBC that the average bet size is between $300 and $400, but he added that several wagers in the millions of dollars also have been placed.
Not Just About POTUS
Other political markets available at Kalshi include the winner of the popular vote, which party will win control of the House and Senate, when the Associated Press will call the election for a presidential candidate and which candidate will win key battleground states.
These markets are available to adults as young as 18. That differs from Kansas sports betting law, which set the age limit at 21.
Kalshi has implemented an aggressive marketing strategy since opening its markets in October. It had digital ads running Sunday at New York’s Madison Square Garden during Trump’s rally there, and other electric billboards have been seen elsewhere across the country.
Pros And Cons Of Political Trading
Some proponents of political trading claim the markets serve as a more accurate measuring stick for races than traditional polling. However, that’s not a sentiment shared by everyone in the trading community.
When the CFTC was initially considering Kalshi’s request, some supporters wrote letters of support saying such markets can serve as a type of insurance policy against an undesired outcome.
For instance, a Democratic lobbyist might take on shares of Trump winning the election even though they would not vote for him. Instead, the shares would generate some revenue that would offset their potential loss of business because of a Republican being in the White House.
While Kalshi’s market obviously shows there’s interest in wagering on politics in the U.S., many politicians themselves oppose it. Speaking at the Global Gaming Expo in Las Vegas a couple of days after Kalshi opened its markets, U.S. Rep. Dina Titus, D-NV, spoke out against legalization.
“There’s a reason that betting on elections is illegal in every jurisdiction in the United States,” said Titus, co-chair of the Congressional Gaming Caucus. “I don’t think this is a path we should be going down in our country. I share the concerns of the CFTC that placing contracts on politics could impact election integrity or create the appearance of impropriety.
“One only needs to look to the UK to see the negative ramifications. However, if it is something that is going to be allowed, state regulators should be at the table.”
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