The Election Betting Experiment: Will Congress Rebottle This Genie?

By: Jake Gray

Just this fall, Americans in all 50 states were able to put their money where they mouth was on the outcome of the 2024 Presidential Election—what many news outlets call, and even one platform itself has called, election betting. Betting, notably, is not legal in all 50 states. Before the Supreme Court’s ruling, sports betting was largely prohibited nationwide under PASPA, with only Nevada and a few other states grandfathered in to varying extents. While nearly 40 states plus the District of Columbia have legalized sports betting in the time since the Supreme Court overturned the Professional and Amateur Sports Protection Act of 1992 (PASPA) in Murphy v. NCAA (2018), election betting as it is currently implemented is not, strictly speaking, betting—the practice is within the boundaries of the financial sector.

More specifically, election bets are structured as “event contracts” on prediction markets. Prediction markets are financial exchanges where participants buy and sell contracts tied to future events, with prices reflecting the market’s collective estimate of probabilities and enabling participants to hedge risks associated with event outcomes. Unlike traditional betting platforms, prediction markets serve a broader economic purpose by aggregating information and allowing businesses to manage real financial exposure to outcomes on events like elections or weather. Such platforms, like Kalshi, operate under the oversight of the Commodity Futures Trading Commission (“CFTC”), a federal agency that supervises these trading venues as Designated Contract Markets (“DCMs”). This means that these contracts function as financial instruments rather than gambling products, allowing their nationwide availability despite varying state-level betting regulations.

But federal approval means federal vulnerability. Unlike sports betting, which the Supreme Court devolved to state control, election markets exist purely through federal permission. This makes them uniquely susceptible to legislative prohibition—one stroke of the Congressional pen could eliminate them nationwide. Election betting is one genie that could, in fact, be put back into the bottle. And on more than one occasion, there have been proposals to do just that.

KalshiEX LLC v. CFTC

To set the stage, a bit of background is required on how we got here. KalshiEx LLC, the DCM originally behind the effort to offer election contracts, submitted its initial proposal for election contracts on which political party would be in control of each chamber of the U.S. Congress (Congressional Control Contracts) after the mid-term elections to the CFTC in 2022.[1] After a public-comment period, multiple extensions, and a review process, the CFTC issued an order disapproving the congressional control contracts on September 22, 2023. CFTC Chairman Rostin Benham, in his public statement on the CFTC’s disapproval of the contracts, stated:

“The approval of political event contracts of the type presented in the Order would require the CFTC to exercise its oversight and enforcement authorities in the manner of an election cop.  Our new authorities would per se include monitoring elections, candidates, and countless participants in the political machinations that proliferate in the media and cyberspace in an effort to prevent manipulation and false reporting within the political system—something that the CFTC currently lacks the mandate to do.”[2]

On November 1, 2023, Kalshi sued the CFTC, arguing that the agency overstepped its authority under the Commodity Exchange Act.[3] The case centered on the CEA’s “Special Rule,” which allows the CFTC to review and prohibit event contracts “involving” certain activities, including “gaming” and “activity that is unlawful under any Federal or State law,” if deemed contrary to the public interest. Notably, neither the statute nor CFTC regulations define “gaming.”

In September 2024, D.C. District Court Judge Jia Cobb decided in favor of the prediction market, writing that Kalshi’s contracts do not involve unlawful activity or gaming, but elections, which are neither sort. Further, the court concluded that “gaming,” as used in special rule, “refers to playing games or playing games for stakes,” a definition contrasted with that provided by the CFTC of “staking something of value upon the outcome of a game, contest, or contingent event,” which it stumbled upon by drawing on state statutory definitions of the terms “bet,” “wager,” or “gambling.” The court concluded that gaming is “tied to games” by looking at federal and state statutes that use the term “gaming.”[4]

The D.C. Circuit Court of Appeals sided with Kalshi on October 2, 2024, permitting the company to legally offer contracts on both congressional control and presidential election outcomes, ensuring that the contracts would be offered throughout the U.S. prior to the election.

In response to and concern over the litigation with Kalshi, and in seeming awareness of an impending loss in the courtroom, the CFTC issued a Notice of Proposed Rulemaking (“NPRM”) aimed at forbidding election contracts through a proper regulatory definition of the term “gaming” that would encompass Kalshi’s proposed contracts before the decision was handed down in the D.C. District Court. To briefly explain the contents of the NPRM, Chairman Rostin Benham provided a summary in his Statement:

“The proposal defines “gaming” and provides illustrative examples of gaming, including the outcome of a political contest, the outcome of an awards contest, the outcome of a game in which one or more athletes compete, or an occurrence or non-occurrence in connection with such a contest or game.

The proposal includes a determination that event contracts involving each of the Enumerated Activities in CEA section 5c(c)(5)(C) (gaming, war, terrorism, assassination, and activity that is unlawful under state law) are, as a category, contrary to the public interest and therefore may not be listed for trading or accepted for clearing through a registered entity.  The illustrative examples of gaming that I just mentioned are therefore contrary to the public interest and cannot be listed for trading.”[5]

But the statutory text of the CEA does not establish a blanket prohibition on contracts involving gaming, recognizing that not all such contracts are contrary to the public interest. Perhaps capturing the sentiment of those against the NPRM, Commissioner Mersinger’s stated: “The Proposal would allow the Commission to make the substantive policy determination that entire categories of event contracts, regardless of their terms and conditions, are contrary to the public interest. And the consequences of such a determination are severe – a complete prohibition on exchanges’ ability to list event contracts, and on market participants’ ability to trade them. If Congress had intended for the Commission to wield this immense authority, surely it would have said so.” For these reasons, combined with the typical reluctance of federal agencies to pursue major regulatory changes during a presidential transition that will bring new agency leadership (Chairman Rostin Behnam has already said he would work with the White House closer to the inauguration to hand the reins of the CFTC over to an acting chair)[6], the NPRM appears unlikely to advance.

The CFTC has failed on both counts to keep the lid on this genie’s bottle.

Congress Tries to Take Action

The strongest showing to ban election betting may come from Congress itself—the body of legislators whose own elections are subject to these contracts. This personal stake has energized opposition on the Hill.

Legislator opposition likely stems from several concerns. First, these prediction markets expose real-time shifts in voter sentiment, potentially impacting campaign fundraising and political momentum in ways traditional polling cannot. Unlike polls which merely show percentage support—and whose limitations in predicting outcomes are well documented—prediction markets reflect probability-weighted outcomes, potentially offering more accurate electoral forecasts. Second, there’s the regulatory challenge of preventing political staffers from leveraging inside information for financial gain—a form of insider trading uniquely difficult to police in the political sphere. Finally, and perhaps most fundamentally, many view these markets as an affront to democratic institutions, transforming what they consider a cornerstone of civic participation into a financial derivative. The fact that these markets would directly impact and influence legislators’ own electoral prospects adds a personal dimension to their opposition that likely intensifies their response.

For instance, in August 2024, a group of prominent Democratic legislators—including Senators Elizabeth Warren, Sheldon Whitehouse, and Jeff Merkley, along with Representatives Jamie Raskin and John Sarbanes—wrote to CFTC Chairman Behnam supporting the proposed rule to ban election contracts. Their letter argued that election markets could “influence and interfere with elections,” enable insider trading by political operatives, and “fundamentally cheapen the sanctity of our democratic process” by turning votes into financial calculations.[7]

And on December 18, 2024, Representatives Jamie Raskin and Andrea Salinas introduced the Ban Gambling on Elections Act to prohibit betting on U.S. elections, a companion to Senator Jeff Merkley’s earlier proposal in the Senate. Unlike the CFTC’s regulatory approach, which relied on interpreting “gaming” to encompass election contracts, this legislative solution would create an explicit statutory ban. The bill is impressively simple. The proposal would add to the end of Section 5c(c)(5) of the Commodity Exchange Act (7 U.S.C. 7a-2(c)(5)) the following provision:

“(D) PROHIBITION RELATING TO POLITICAL ELECTIONS OR CONTESTS.—Notwithstanding any other provision of this section, no agreement, contract, transaction, or swap involving any political election or contest (or any index, measure, value, or data related thereto, or occurrence, extent of an occurrence, or contingency based thereon) may be listed or made available for clearing or trading on or through a registered entity.”.[8]

While the legislative push has come primarily from Democrats so far, election betting has drawn bipartisan skepticism in the past. When West Virginia briefly legalized election betting for sportsbooks in 2020, the backlash was swift and severe, with Secretary of State Mac Warner, a Republican, invoking a 150-year-old law to block the initiative. “Gambling on elections has been illegal in West Virginia since 1868,” Warner declared.[9] “Gambling on the outcome of an election has no place in our American democracy. Not today. Not tomorrow. Not ever.” Republican Governor Jim Justice expressed disbelief at the proposal, stating “I thought, you know, are you kidding me? The first thing that came to my mind was, you know, what next? It’s humorous but it’s ridiculous.”[10]

Given that legislative action and support may have been delayed as we head toward the conclusion of Biden’s second term, there may yet be greater congressional appetite to tackle election contracts in 2025 when a new administration takes office.

A Ban May Not Be a Good Idea

Off-shore prediction markets would undermine any potential ban. The history of sports betting in America teaches a clear lesson: banning betting doesn’t stop it—it just moves it offshore, where operators can offer these products without any oversight, consumer protection, or tax obligations.

We have already seen this play out in the prediction market arena with Polymarket, a NYC-based cryptocurrency prediction market that openly offers event contracts on U.S. elections, and even did so during Kalshi’s fight with the CFTC when the contracts were still not allowed. While the CFTC has taken enforcement action against Polyares in the past—including a $1.4 million settlement in 2022 for offering unauthorized binary options—the platform continued to list election contracts, demonstrating the practical challenges of enforcing restrictions in a borderless digital economy.[11] Multiple reports suggested that Polymarket’s election contracts topped $3.7 billion in volume, dwarfing the legal volume presented by Kalshi and Robinhood which together totaled $790 million.[12] Although the FBI did raid the Polymarket CEO’s apartment in NYC, seizing his electronics.[13]

The irony is clear: a ban on regulated election markets may do more harm than good. With platforms like Polymarket already demonstrating that unregulated alternatives exist, pushing these markets offshore could leave American consumers with less protection than they’d have under proper oversight. Sometimes the bottle is better left open.

[1] The contracts would have been cash-settled, binary contracts based on the question: “Will <chamber of Congress> be controlled by <party> for <term>?”  https://www.cftc.gov/IndustryOversight/IndustryFilings/TradingOrganizationProducts/48820

[2] https://www.cftc.gov/PressRoom/SpeechesTestimony/behnamstatement092223

[3] https://www.reuters.com/world/us/predictions-market-kalshi-sues-cftc-blocking-election-contracts-2023-11-01/

[4] https://www.ifrahlaw.com/ifrah-on-igaming/cftc-special-rule-interpretation-leads-to-an-october-surprise/

[5] https://www.cftc.gov/PressRoom/SpeechesTestimony/behnamstatement051024

[6] https://johnlothiannews.com/rostin-behnam-reflects-on-tenure-as-cftc-chairman-in-john-lothian-news-fia-expo-interview/

[7] https://www.merkley.senate.gov/wp-content/uploads/CFTC-Letter-FINAL.pdf

[8] https://raskin.house.gov/_cache/files/d/1/d1483a29-6c78-491b-8af4-3c8546e2cf4e/17F8E63E0614373AB06214B84E41C994.ban-gambling-on-elections-2024-bill-text.pdf

[9] https://nypost.com/2020/04/08/political-betting-was-legal-in-west-virginia-for-about-an-hour/

[10] Ibid.

[11] In re: Polymarket, CFTC Docket No. 22-09 (Jan. 3, 2022); https://www.cftc.gov/media/6891/enfblockratizeorder010322/download

[12] https://www.dlnews.com/articles/markets/polymarket-volumes-and-users-plummet-after-trump-wins-election;

[13] https://nypost.com/2024/11/13/business/fbi-seizes-polymarket-ceos-phone-electronics-after-betting-platform-predicts-trump-win-source/