For the first time in nearly a century, Americans can now legally and widely participate in betting on election outcomes across the United States.
A federal appeals court ruling early last month cleared the way for Kalshi, a regulated exchange and prediction market, to offer betting markets on the presidential race and congressional control. This landmark decision allows American citizens to wager on key political outcomes, including which party will control the Senate and House of Representatives, as well as the hotly contested presidential race between Donald Trump and Vice President Kamala Harris.
Kalshi aimed to establish a regulated platform for election outcome betting, but its regulatory body—the Commodity Futures Trading Commission—rejected this proposal. The CFTC argued that such election markets could potentially compromise election integrity, as stated in its filed motion. The regulator expressed concern that even a brief period of offering election contracts could undermine public confidence in the electoral process.
Despite these objections, the Washington D.C. appeals court said the CFTC was unable to provide substantial evidence demonstrating that these markets would cause significant harm to the public interest.
“More to the point, the Commission has not explained why traditional tools for regulating market manipulation will not work in the election-contract context. For example, the Commission can serve subpoenas, call witnesses, and hold hearings to investigate whether someone is manipulating an event contract,” wrote Circuit Judge Patricia Millett.
Election betting in the U.S., while growing, remains significantly smaller than sports betting. Kalshi reported that Americans have legally wagered over $123 million on the presidential election to date. This figure is dwarfed by the estimated $23.1 billion bet on Super Bowl LVIII and $2.7 billion on March Madness this year, according to the American Gaming Association.
However, given Americans’ significant enthusiasm for sports betting, the market for political wagering shows substantial potential for growth in upcoming election cycles. This expansion could likely result in a surge of job opportunities in compliance and regulatory roles within the industry.
As the sector develops and faces increased scrutiny, there will be a greater need for professionals to ensure that betting platforms adhere to legal and ethical standards, manage risk and navigate the complex regulatory landscape surrounding election betting.
Wash Trading
A trader from France, identified only as “Théo,” has garnered attention for wagering an enormous $30 million on Trump’s victory in the 2024 U.S. presidential election using Polymarket, a cryptocurrency-based prediction platform. This high-stakes bet could potentially yield around $80 million if successful, but also carries the risk of substantial losses should Harris emerge victorious.
To build his position, the trader reportedly used multiple accounts to place over 450 individual bets ranging from $5 to tens of thousands of dollars over a 10-hour period. This method was designed to prevent rapid price increases.
Blockchain analysts have raised concerns about wash trading, a manipulative trading activity that is illegal in financial markets, Fortune reported.
Wash trading occurs when a trader or group of traders buy and sell the same security or financial instrument, often simultaneously or within a short time frame, with the intent to create misleading market information.
The primary objectives of wash trading include artificially inflating trading volume, creating a false impression of market activity and potentially manipulating the price of a security. This practice typically involves the same or substantially similar financial instruments and occurs between accounts with common ownership, resulting in no significant change in the trader’s market position or risk exposure.
Wash trading is prohibited under U.S. law, specifically by the Commodity Exchange Act and the Securities Exchange Act of 1934, and financial regulators closely monitor markets for signs of such activity due to its potential to distort market integrity and mislead investors.
Additionally, the IRS disallows tax deductions for losses from wash sales, defined as occurring within 30 days of buying the same security. While rapid buying and selling of securities can happen for legitimate reasons, it becomes classified as wash trading when there is intent to manipulate the market without genuine risk or change in position.
According to Bloomberg, Polymarket is conducting a thorough review of its users’ information, with a particular focus on those placing substantial bets. This process aims to verify that all users are in compliance with the platform’s regulations.
Compliance And Regulatory Hiring
As the election betting market continues to expand and mature, the need for robust compliance and regulatory frameworks will likely grow, driving demand for professionals in these areas across betting platforms, regulatory agencies and supporting industries.
Regulatory bodies like the CFTC will need to expand their workforce to monitor and enforce compliance in this new market. This could create job opportunities for regulatory specialists.
The evolving legal landscape surrounding election betting could create a demand for lawyers specializing in gambling and election law to help companies navigate the complex regulatory environment.
Betting platforms will likely need to bolster their compliance teams to ensure they adhere to new regulations and maintain proper oversight of their users. This could include hiring experts in Know Your Customer procedures and anti-money laundering practices.
As the market grows and attracts larger bets, platforms will need to hire additional risk management professionals to monitor for potential market manipulation or other fraudulent activities.
To maintain the integrity of betting markets and prevent manipulation, platforms will need to hire data analysts to monitor betting patterns and investigate suspicious activities.
With restrictions on U.S. users for some platforms, like Polymarket, there will likely be an increased need for professionals who can verify user identities and ensure compliance with geographical restrictions.
The development and implementation of regulatory technology solutions specific to election betting could create jobs for software developers and compliance technology specialists.
Source: Forbes
