A Bet on Power: Financial Markets Open Election Betting in the USA

A remarkable shift in the political spectrum of the United States: Voters can now legally wager thousands of dollars on who will capture the White House—a thrilling development in an already turbulent election year. The financial market start-up Kalshi and the established broker Interactive Brokers have launched the first regulated market for betting on the presidential race between Vice President Kamala Harris and former President Donald Trump. At Kalshi, wagers of up to $100 million are possible. Both companies also enable trading on whether Republicans or Democrats will control the House and Senate in the coming year. Interactive Brokers additionally offers markets for Senate elections in the contested states of Ohio, Arizona, and Wisconsin. Steve Sanders, Vice President at Interactive Brokers, stated: "Politics is a hot topic for many people. They have strong convictions, no matter the direction." According to him, these new markets could spark significant discussions. Within just a few hours of market launch, over half a million presidential-related contracts were traded on Interactive Brokers' platform, while Kalshi's trading volume was over $300,000. While proponents argue that such markets provide investors with a regulated way to hedge electoral risks and offer valuable data on political sentiment, critics warn of potential manipulation dangers. Robert Weissman of Public Citizen expressed concerns about the "gamification" of democracy and the influence individual actors might have on election outcomes. Despite a prolonged blockade by the Commodity Futures Trading Commission (CFTC), new avenues opened for Kalshi and Interactive Brokers through a legal battle. A court ruling temporarily allowed the company to launch its congressional control markets before an appellate court lifted the block and revitalized the markets. However, the fate of political betting in the U.S. remains uncertain, as the CFTC has appealed the decision. Regulatory pressures could increase if the CFTC seeks to enforce a ban on election bets as legally impermissible derivatives—a development with the potential to significantly broaden the agency’s role.