All right let’s get some disclosures out of the way.
I’m Canadian (gasp). I’ve never been to Washington, D.C. I’ve bet on politics. I work for and am paid by a sports betting website. If the U.S. were to legalize betting on its elections, it would probably have some sort of benefit for me in the long run.
But, with all that said, everything I've seen and heard and felt and absorbed this past year has driven me to the following conclusion: The United States should legalize betting on its elections.
There are plenty of arguments for doing so, but allow me to make the easy ones first: it’s fun. It’s interesting. It’s what (some) people want. Other countries allow it without any major problems.
And then there’s the simple fact that Americans are already betting on U.S. election odds. This is true in theory and practice.
.@HalieyWelchX shares her new Presidential Slogan ?
— Talk Tuah with Haliey Welch (@talktuahpod) October 29, 2024
Use @Kalshi to bet on that thang ?? pic.twitter.com/aZS74i41oA
History tells us Americans have long loved wagering on their political contests. Americans can also access online sportsbooks based offshore and abroad, and those sportsbooks are taking bets on the election. So it’s almost certainly happening there, and the “almost” in this sentence is me being polite (I already said I’m Canadian).
Furthermore, Americans appear to have been wagering on the election via Polymarket, which isn’t supposed to let that sort of thing happen. The prediction market has recently been double-checking to ensure its bettors are based outside of the U.S. (again, as they must be) after Bloomberg reported a surge in election-related trading that included American wagering.
“In practice, Polymarket’s system for blocking U.S. users can be circumvented by using virtual private networks, and social media is full of instructions on how to do it,” the financial news outlet said recently.
Similar prediction markets are operating legally in the U.S. as well, such as Kalshi, Interactive Brokers, and, as of very recently, Robinhood. You could argue this isn’t “betting” — by calling it “hedging” or “investing” or “trading” or what-have-you — but I would argue you’re just being cute. Kalshi’s ads even tell people they can “bet on the election.”
A (gambling) house divided
So it’s betting. There’s betting happening on the U.S. election, and Americans are doing it.
However, the legal status of that wagering remains up in the air. The U.S. Commodity Futures Trading Commission is still fighting in court to put an end to Kalshi’s election contracts, which could kill the same offerings at Robinhood and elsewhere if the regulator is successful.
The CFTC is also proposing a new rule that aims, among other things, to snuff out election-related event contracts. So, even if it fails in court, it could be that companies will have to fight the regulator anew if and when it finalizes this new rule. Meanwhile, the CFTC is begrudgingly monitoring these nascent election-betting markets.
“In any event, litigation here may prove to have been a side-show, with the Commission seemingly determined to move forward with a ban,” Orrick lawyer Behnam Dayanim wrote in early October. “The next step may be the (inevitable?) challenge to whatever rule the Commission adopts.”
So Americans are betting on elections. They are doing so through sites that are not regulated domestically or ones that are under the oversight of a regulator that doesn’t really want those betting markets to exist and is only reluctantly overseeing them. This is a very shaky status quo.
Interesting ruling. The D.C. Circuit appeals court decision today paves the way for Kalshi to re-offer de facto election betting, but leaves the door open for another pause if the CFTC can find some "cognizable harms" created by the event contracts, such as voter confusion. pic.twitter.com/YzSYMDlOT4
— Geoff Zochodne (@GeoffZochodne) October 2, 2024
If Kalshi keeps winning in court (it is operating legally now thanks to some recent successes with the D.C. judiciary), all of this becomes something of a moot point, because they’ll just keep doing what they’re doing. Election betting will become entrenched in its current way, which is more like a financial market than a sports betting market. And that’s fine, I guess. There are ways of regulating and policing prediction markets that could provide a degree of comfort for everyone.
Election betting in this event would continue over the objections of the CFTC, as well as the many states with laws on the books banning election betting. It's a very begrudging way of legalization, with opponents forced into it kicking and screaming. Ultimately, though, they may learn to live with it.
It would kind of be like Murphy v. National Collegiate Athletic Association, the 2018 decision by the U.S. Supreme Court that struck down the Professional and Amateur Sports Protection Act (PASPA) and paved the way for the widespread legalization of sports betting at the state level. Professional sports leagues fought the pro-sports betting mob, but once the latter group won, the leagues embraced sports betting.
That said, for the sake of argument, let’s say the CFTC prevails in court, or finalizes its proposed regulation, and all legal election wagering in the U.S. screeches to a halt. Maybe it never resumes. Will Americans stop betting on their elections? Probably not. They’ll just look to unregulated outlets that will keep taking action no matter what.
Tear down this wall
So I think there’s an opportunity here for someone to seize control of the situation, and it’s the states.
Legalizing and regulating election betting at the state level could address one of the CFTC’s concerns and offer an alternative avenue for political wagering that could be overseen by local gaming regulators.
“The Commission prohibited Kalshi from listing the Congressional Control Contracts on its regulated exchange on the ground that they amount to gaming or election gambling, which many States outlaw,” Judge Patricia Millett noted in an Oct. 2 opinion for the U.S. Court of Appeals for the District of Columbia Circuit.
So, if the states no longer outlaw election gambling, the CFTC loses a reason for prohibiting Kalshi-style election betting. It then creates the possibility of states regulating election betting in their own right via entities that have a lot of experience with event wagering: sportsbooks.
It’s happened before.
In 2020, West Virginia briefly allowed wagering on U.S. elections, and FanDuel put up odds on the presidential election. However, the state lottery reversed the decision amid political pushback and concern about a preexisting anti-election betting law.
“The very second I found out about it, I disapproved it, because we’re not going to do that,” Gov. Jim Justice reportedly said. “That’s absolutely ludicrous. It’s humorous, but it’s ridiculous.”
The only thing to fear ...
So the first obstacle to the legalization of election betting could be the kneejerk reaction it prompts. Even the idea may be offensive to some: You want to bet … on … DEMOCRACY? Gross. Don’t even. Non-starter.
And yes, the staying power of American democracy has been put to the test in recent elections and could undergo another trial starting on Nov. 5. Opening up new avenues for people to try to benefit financially (or not) could be seen as another way of eroding the sanctity of elections.
But let’s not kid ourselves, elections are already being debased, and in ways I would argue are much more effective and appalling than some sportsbook-type wagering.
Wealthy donors are bankrolling candidates and parties of their choice with enormous sums, and surely they expect some kind of return on their investment. A good chunk of that money is being spent on advertising that offends even MY delicate sensibilities. Oh, and Elon Musk has been cutting giant, golf tournament-like checks for swing-state voters who sign a petition.
“With billionaires in public office, and money already a huge part of U.S. elections, the idea that betting could tarnish the democratic process is ‘laughable,’” West Virginia Delegate Shawn Fluharty told the Wall Street Journal in 2020. Fluharty is now the president of the National Council of Legislators from Gaming States.
So, would betting exacerbate the state of American elections? If you ignore the fact it’s already happening (and, again, it’s happening), yes, sure, maybe. But there are more powerful actors bent on degrading the democratic process all on their own (although they may not see it that way), and they’re not even boosting same-election parlays.
Will get 69.420%, as foretold in the prophecy https://t.co/ubFKrORwvA
— Elon Musk (@elonmusk) October 28, 2024
Here’s Dayanim, again, writing recently about the ongoing legal battle between Kalshi and the CFTC over election-related event contracts:
“Yes, creating more economic incentives to distort political outcomes may seem unwise, but it seems unlikely that the economic interests reflected by event contracts on these markets will come close to the immense economic interests that already hinge on political outcomes. And the United Kingdom long has permitted betting on political campaigns with no fundamental threat to the integrity of their elections.”
The mention of the U.K. is interesting. The country had a wagering-related scandal recently involving allegations of insider betting on the timing of the country’s 2024 general election.
So perhaps here you could argue that election betting is a bad thing because you’ll have politicians pulling various shenanigans, like using their knowledge to turn a profit.
“Allowing billionaires to wager extraordinary bets while simultaneously contributing to a specific candidate or party, and political insiders to bet on elections using non-public information, will further degrade public trust in the electoral process,” a group of Democratic lawmakers warned in August.
A change in the swing states that will make Harris backers happy as Wisconsin moves from red to a toss up on the Exchange!
— Betfair Exchange (@BetfairExchange) October 31, 2024
Well, the U.K. election betting scandal broke open, at least in part, because of regulation.
Yes, "Gamblegate" came to light after “a red flag was automatically raised” at sportsbook operator Ladbrokes, which was due to suspected "politically exposed" punting, according to the Guardian. Ladbrokes then told the U.K. Gambling Commission about it and away they went.
Now, if a politician placed a bet on the election date with an unregulated operator, would a “red flag” get raised? Possibly. Would the operator tell the U.K. Gambling Commission? I would argue they wouldn’t, because why would they? To get in the good books of a regulator who doesn’t regulate them? And alert the authorities to their unregulated business?
Similar to how Ladbrokes sounded the alarm in the U.K., sports betting companies in the U.S. took their concerns about suspicious wagering on some NBA games earlier this year to the league itself. The NBA would later ban former Toronto Raptor Jontay Porter for disclosing inside info to bettors, limiting his play for betting purposes, and wagering on the league's games.
Here's the first of what I suspect will be a few stories involving today's MGC meeting on limiting:
— Geoff Zochodne (@GeoffZochodne) September 11, 2024
Massachusetts Drags Sports Bettor Limiting Into the Light of Day https://t.co/pEGcP7w2uH @Covers
And, to be blunt, no sportsbook is going to take a bet of $500,000, $1 million, or more on an election, at least not without taking a long look at who is placing that wager. Although it should be noted sportsbook operators such as bet365, DraftKings, and FanDuel already take election bets in the Canadian province of Ontario (but not in the U.S.), these are smaller markets with limited liquidity.
As any successful sports bettor would tell you, the books have these things called “limits,” and they aren’t afraid to apply them. Elections would likely be subject to the same limits and risk-management practices. The idea of John Q. Billionaire registering for a FanDuel account and then getting down a $10-million bet on the election is almost laughable.
But, for the sake of argument, let’s say some bad actor does get down a big bet. If there is subsequently some strange activity, the attention of the books will snap to that bettor. What did they know? Who do they know? The investigation begins, and these companies don’t make money by losing. They also have anti-money laundering procedures and "know your customer" processes to keep them informed of who is actually betting.
So, if an operator determines something untoward happened, that bettor is gone. At the very least, perhaps, they’ll be limited. Maybe we’d see them at a future Massachusetts Gaming Commission meeting.
(I’d also note that while well-informed politicians may have a problem with election betting, they can and do gamble in the stock market. They are beginning to warm up to sports betting companies and the audience and platforms they provide as well. Most notably, Democratic candidate Kamala Harris has advertised on DraftKings.)
Ask not what a federal regulator can do for you ...
Let’s wrap up.
Election betting is happening in the U.S. More and more is happening every day. It’s happening offshore or with companies overseen by a regulator that doesn’t really want to be the regulator of those markets. And, if these markets are killed, the betting won’t stop.
So the genie is out of the bottle, the horse has left the barn, etc. Maybe we’ll look back and view the Kalshi court rulings as we now do the PASPA decision in 2018.
It was Supreme Court Justice Samuel Alito who wrote the majority opinion in the PASPA case, and he said that “Congress can regulate sports gambling directly, but if it elects not to do so, each State is free to act on its own.”
The states should act again. Now is not the moment for them to run away or turn a blind eye. Now is the time to legalize and regulate U.S. election betting.
