Dem
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GOP
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Until yesterday, betting on U.S. elections was illegal. Bettors who wanted to wager on U.S. elections had to go to William Hill in the U.K. or PaddyPower in Ireland—and they had to hide their IP addresses using VPNs. A new startup called Kalshi wanted to allow bets of up to $100 million on which party will control each chamber of Congress, with other wagers coming up later. The Commodity Futures Trading Commission, which is more famous for regulating the market in pork bellies, didn't like the idea at all and went to court to stop the company. A judge put a temporary freeze on the company's plans. Yesterday, a federal appeals court in D.C. lifted the freeze, so the company is now free to start taking bets pending a full appeal on the merits of the case. Kalshi will be fully regulated by the CFTC, the same way other futures markets are.
Many people believe that betting on political outcomes is a very bad idea, not unlike baseball players betting on baseball games (one notable player with that habit died recently, as you might have heard). There are many potential problems. A big company could place a bet on some relatively unknown person to win a primary at longshot odds. It could then funnel big-time dark money into a super PAC to support the candidate, which could lead to a big payout. So, by manipulating political outcomes, big players could make big money.
Alternatively a wealthy individual could place large bets simply to influence the odds and affect public opinion. If everyone knew that candidate X was the overwhelming favorite due to the betting odds, that could discourage people from voting for the other candidate(s) because they felt the race was already lost. Campaign betting would provide another way for very rich people to influence elections. Sen. Jeff Merkley (D-OR) called election betting a "nightmare" scenario that could allow wealthy players to "put their thumbs on the scale." He said betting was a deeply corrupting influence.
Cantrell Dumas of the watchdog group Better Markets noted that on Jan. 6 a bunch of aggrieved people stormed the Capitol because their favored candidate didn't win. He said: "Can you imagine a situation where people with real money in the election [are] betting? ... The integrity of our Democracy is already in a fragile state." Suppose people who expected to win $1,000, or $10,000, or more felt they were cheated out of it. What would they do?
This issue illustrates a bigger problem in the country. Congress makes a law banning something—for example, based on its power under the Commerce Clause. Then somebody does it anyway. It goes to court and then one or more judges overrule Congress because, well, they can. There is a clear federal law banning political gambling. A company announces it is going to break the law and then a three-judge panel decides to overrule Congress. This is not the first time we have seen this movie. (V)