A federal judge has allowed betting on election results in the US in some states less than two months ahead of the 2024 United States elections after the overturning of a prohibition imposed on gambling companies.
Last November, Kalshi, a financial institution based in New York, sued the Commodities Futures Trading Commission (CFTC) in an attempt to overturn a decision preventing companies from offering what amounts to bets on outcomes of Congressional elections.
Last Friday (Sept. 6), U.S. District Court Judge Jia Cobb ruled in favor of New York-based Kalshi. On Thursday, the CFTC motion for delay was denied by Cobb, effectively denying the CFTC time to appeal and allowing betting to begin in some states.
Some states implement legislation which prevents the practice of betting on elections regardless of this ruling, including Texas and Nevada. However, Kalshi is able to offer bets on the outcomes of congressional races in states that do not impose blanket bans on election betting.
"The commission lost, fair and square, on the law," Kalshi wrote in a court filing. "It should not be allowed to snatch a procedural victory from the jaws of defeat by running out the clock" until the Congressional elections happen in November.
In May, the CFTC proposed regulations that would re-classify election betting as a type of gaming, hence making it explicitly illegal due to the CFTC's jurisdiction over gaming. In a statement released in May, CFTC chairman Rostin Behnam defended these proposed rules.
"Contracts involving political events ultimately commoditize and degrade the integrity of the uniquely American experience of participating in the democratic electoral process," said Behnam.
In the written ruling, Judge Cobb stated that the CFTC had "exceeded its statutory authority" in attempting to use its jurisdiction over the practice of gaming to prohibit election betting. "Kalshi's contracts do not involve unlawful activity or gaming. They involve elections, which are neither," the judge wrote.
Kalshi argued that betting activity pertaining to elections can serve as valuable alternatives to conventional polling.
"You get more truth out of these markets," said Tarek Mansour, co-founder of Kalshi. "They do a better job at aggregating the prevailing wisdom."
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