Interactive Brokers announced today it will launch wagering on US election outcomes on Monday, September 16, following a federal court’s ruling in favor of Kalshi, a prediction market operator aiming to offer event contracts on US elections. The decision came from District Court Judge Jia Cobb, who backed Kalshi after the Commodity Futures Trading Commission (CFTC) had previously blocked the company from offering election markets. Kalshi had sued the commission in 2023, arguing that the CFTC overstepped its authority in preventing the exchange from offering cash-settled election outcome contracts. With less than two months to go before the 2024 presidential and congressional elections, Judge Cobb’s ruling highlighted that Kalshi’s contracts do not constitute gambling or any illegal activity.
“This case is not about whether the Court likes Kalshi’s product or thinks trading it is a good idea,” Cobb wrote in her opinion. “The Court’s only task is to determine what Congress did, not what it could do or should do. And Congress did not authorize the CFTC to conduct the public interest review it conducted here.”
Following the ruling, Kalshi quickly launched two election-related betting markets — one on whether Democrats or Republicans will control the House and Senate after the November 5 elections.
To date, traditional betting on US elections has been illegal, but some companies have found ways to participate through alternative methods. For instance, Polymarket has seen an uptick in interest by allowing clients to purchase shares in an event, treating shares as assets rather than bets.
Interactive Brokers is set to allow clients to wager directly on the 2024 presidential race in a binary manner, permitting them to bet either on Vice President Kamala Harris (D) or former President Donald Trump (R). The brokerage mentioned to the Wall Street Journal that it also plans to provide betting options on select swing state Senate races, though specifics were not disclosed.
For those looking to invest in the 2024 election, the access provided by Interactive Brokers could be highly significant. The company is known for running the largest electronic trading platform in the US, processing over three million trades per day, and it is regulated. With more than 1.7 million client accounts, the firm indicates substantial profit potential in allowing electoral wagers. As of early August, data showed that more than $1 billion had been wagered on the US presidential race in gray market venues like PredictIt and Smarkets.
Interactive Brokers brings relevant experience to the table, having recently introduced its ForecastEx platform, which allows bets on economic indicators such as consumer sentiment, inflation, and monthly jobs reports.
Other financial services firms are also entering the prediction markets. Earlier this year, trading house Susquehanna International Group began making markets on Kalshi related to the Federal Reserve’s interest rate plans and even movie reviews.
Despite the burgeoning market for election betting, some groups argue it is inappropriate and potentially damaging to democracy. “Democracy in America is at a fragile crossroads, with more Americans questioning the integrity of elections than ever before,” said Cantrell Dumas, director of derivatives policy at Better Markets. “The shocking attack on the Capitol on January 6, 2021, is just one glaring example, but across the country, less visible incidents continue to chip away at the public’s confidence in our elections and democracy itself. In this shaky political moment, the last thing our country needs is for democracy to be undermined further by allowing gambling on elections.”
