Contract market KalshiEx has listed greater than two dozen latest options in recent days for the exchange's customers to bet on political outcomes, including the presidential race, the favored vote and that race's Electoral College results, in addition to individual Senate contests.
The latest contracts were added to Kalshi's platform inside days of a positive federal appeals court ruling for the corporate on October 2. The ruling lifted an injunction that had blocked Kalshi from offering contracts that may give political parties control of every chamber of Congress after November elections.
A day later, Kalshi offered his customers a contract that may allow them to bet on the winner of the presidential election and potentially protect against any losses a customer might experience.
As of Wednesday, greater than $3 million had been bet on political contracts on Kalshi's website, the lion's share of which was on contracts on whether Vice President Kamala Harris or former President Donald Trump would win the presidential election.
Other contracts available to bet on Wednesday included the outcomes of individual Senate races, which state can be the tipping point within the presidential election, which presidential candidates would win individual swing states and what the margin can be within the race for the White House.
“It was great, there was huge demand,” Kalshi CEO Tarek Mansour said in an interview in regards to the response to the exchange’s latest political contract options.
Adding those options “was always the plan,” Mansour said, as the corporate fought a government-imposed ban on a majority of these contracts Commodity Futures Trading Commission.
For Mansour, political final result betting contracts represent a way for investors to hedge against the broader financial impact of 1 political final result over one other – fairly than a method to influence the election itself.
“Each of these markets presents different risks,” he said. For example, if a president imposes tariffs, it could impact a customer's financial situation.
He said Kalshi's political final result contracts were a more direct method to hedge such risks than the “bundles” of deals offered by investment banks to supply clients with protection against the election of a specific presidential candidate.
“We have a healthy mix of customers looking to hedge financial risks and speculators,” he said.
“Everything Kalshi does is subject to the law and regulated,” Mansour said, noting that the exchange must maintain records of its customers which can be available to the federal government.
“We believe the law is on our side,” he said.
The CFTC disagrees.
Kalshi “went full throttle on election betting,” the CFTC said in an announcement submission Tuesday within the U.S. Court of Appeals for the District of Columbia Circuit.
Even more political races may soon turn out to be available for betting with Kalshi contracts, the CFTC said, citing contract terms posted on the exchange's website. These include the 435 individual elections within the House of Representatives and other gubernatorial elections on the state level.
“Some of these blatantly contradict Kalshi's own arguments at the Court's recent hearing – that his contracts were not gambling because they were based on economically significant events,” the CFTC said in its filing.
“This does not apply to a contract that bets on whether a particular state will have the largest lead in the popular vote, or a contract on the winner of the popular vote, to name just two.”
The CFTC's filing supported an earlier request by the regulator that the appeals court expedite the agency's appeal of a lower court ruling that allowed Kalshi to take bets on the final result of political races.
A CFTC spokesperson declined to comment to CNBC on the case. However, the commission argues that Kalshi's contracts could raise doubts in regards to the integrity of the elections.
A federal district court judge in Washington, D.C., ruled last month that the CFTC's ban on Kalshi's congressional contracts was invalid since the regulator had wrongly determined that the contracts involved gambling or betting.
The appeals court initially blocked the judge's ruling from taking effect, which resulted in Kalshi being unable to supply political contracts.
But in last week's decision, a three-judge panel of the appeals court overturned the unique ban, saying the CFTC had “failed to demonstrate at this time that irreparable harm would be caused to it or the public” if the contracts were offered would while the agency continued its appeal of the judge's decision.
Appeals Court Judge Patricia Millett noted within the ruling that “the question of the merits” of the CFTC's appeal is “narrow and difficult,” giving the regulator reason to hope that its ban on political contracts will likely be reinstated in some unspecified time in the future becomes.
Another essential issue for Kalshi and the CFTC is the timing of any legal proceedings.
The CFTC called for expedited briefing on Tuesday, saying: “The public has an unusual interest in a quick resolution of the facts in this case.”
That's because “the court's decision has implications for the regulatory landscape for event contracts, the role a federal agency will play in overseeing election markets, and indeed issues of election integrity and perceptions of election integrity,” the regulator said within the filing .
Mansour, the CEO of Kalshi, said there was “no evidence” that political contracts “endanger election integrity.”
Mansour said any attempt by a client to influence the market's effective prediction of a specific final result by betting on a specific candidate would cost loads of money.
And even when it worked within the short term, other customers would bet against that final result once they saw the market misjudge the likelihood of that election final result, he said.
image credit : www.cnbc.com