Bettors Flock to Political Prediction Markets for US Presidential Election
Today, November 5, Americans will cast their votes to elect a new president and for the first time, people in the US have been able to make use of political prediction markets on platforms such as Kalshi.
Trump vs Harris in battle for US President's seat. Millions bet on political prediction markets ahead of US election.
LISTEN TO THIS ARTICLE:Political prediction markets, also known as derivatives exchanges, offer “yes/no” event futures on topics from politics to pop culture. Though these markets have existed for years in a legal grey area, a recent federal ruling has given them greater legitimacy.
On October 2, the US Court of Appeals for the District of Columbia ruled in favor of Kalshi, a New York-based exchange. The Commodity Futures Trading Commission (CFTC) have boosted their surveillance and have delisted Kalshi’s Senate and House-related contracts in June 2023, arguing that their speculative nature made them gaming.
However, Kalshi countered by drawing parallels to legal sports betting and pointed out the advantages of regulated markets over grey-market alternatives. Kalshi stressed that its real-time data tracking would offer accurate insights amid widespread election misinformation and could encourage civic engagement through financial involvement.
Kalshi Surpasses $250 Million in Contracts
While Kalshi’s broader impact remains to be seen, its popularity is already clear. By October 15, Kalshi had facilitated around $15 million in political contracts and this grew to over $250 million by November 3. The presidential race is the largest market, with over $184 million in contracts as of Sunday evening, and the numbers continue to rise. Other popular markets include the electoral college margins, the national popular vote, and results for individual states.
The original Senate and House contracts, those initially flagged by the CFTC, now have the lowest volume, each with under $1 million as of Sunday night.
Related: How Novelty Bets Became the Hot-Button Issue of Election Year
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Kalshi’s Millions, Polymarket’s Billions
Despite Kalshi’s significant growth, other platforms are dominating the scene. Polymarket, a New York-based crypto-backed platform, has attracted over $3 billion in political contracts this election cycle. However, Polymarket remains unavailable to US users due to its scrutiny by the CFTC. Unlike Kalshi, Polymarket operates without CFTC registration, making its regulatory future uncertain.
Another major player, PredictIt, is operated by New Zealand’s Victoria University of Wellington. While PredictIt claims to be a research tool for the international academic community, the CFTC revoked its “No Action Letter” in March 2023. PredictIt’s status is under review, with a note to users on its site acknowledging the potential for contract termination based on future court rulings. PredictIt reports 10.9 million “active shares” on the presidential election, which, with a per-contract cap of $850, suggests billions in active shares.
The CFTC has said that it will continue to fight against Kalshi and political contracts. However, with the election taking place today, it is too late for it to have an impact on this election cycle.
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