A political betting revival?

From: POLITICO's Morning Money - Friday Jun 30,2023 12:01 pm

Jun 30, 2023

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Programming note: We’ll be off this Monday and Tuesday for the Fourth of July but will be back in your inboxes on Wednesday.

America’s political betting markets are mounting a comeback bid for 2024 — no matter Washington’s concerns.

PredictIt, the political markets operator that federal regulators tried to shut down months ago, has launched new contracts that allow for bets on the longshot presidential bids of Vivek Ramaswamy, Chris Christie and Robert F. Kennedy Jr. The startup Kalshi, which has also faced regulatory resistance, is refusing to back down from offering wagers on congressional control.

“We’re going to keep pushing,” Kalshi CEO Tarek Mansour told MM. “It’s going to happen at some point. We’re just going to keep going at it.

The political betting world’s regulatory nemesis has been the CFTC, which regulates derivatives trading and has long-running concerns that election-related betting runs afoul of rules for that market. The agency tried to shut down PredictIt last year -- in a dispute over its status as an academic venture -- but has been forced to back off pending litigation. CFTC officials have spent months considering whether to block Kalshi’s offerings given questions about their legality, but it just punted by asking for a second round of public comment on the market operator’s plans.

Proponents of political betting – including economists like Jason Furman — argue it’s a better gauge of where voters stand than polling and is a hedging tool for election risk. Investor advocates warn that it will lead to excessive gambling. CFTC Chair Rostin Behnam has even raised concerns that it could make his agency an “election cop.”

CFTC officials are engaged in a tense debate over whether to give Kalshi the go-ahead. The agency’s two Republican commissioners – the minority on the CFTC’s five-member board – have dissented against its decision to drag out the answer to the question of whether Kalshi’s products are prohibited as a type of “gaming.”

“If we don’t want political control contracts, we should say that in a rule,” CFTC Commissioner Summer Mersinger, who dissented against the review, told MM. “This, to me, felt like another delay tactic — no real answer is given to anyone, and that’s frustrating to everyone. We’re not giving a real answer.”

In the meantime, traders like Caleb Davies aren’t stopping.

Since the CFTC ordered PredictIt to close last summer, the Minneapolis-based IT worker has been trading on other venues like the American Civics Exchange, which has been permitted to operate in a regulatory carveout with certain limits. Davies estimates his total profits on prediction markets trades since 2015 are more than $100,000. He has $24,000 riding on two bets: That Sen. Dianne Feinstein (D-Calif.) will not retire before 2024 and that there won’t be a special election to replace Rep. George Santos (R-N.Y.) this year.

If both pan out, Davies stands to make an extra $32,000.

Happy Friday — We’ll be back in your inboxes July 5. Until then, please send tips: Zach Warmbrodt, Sam Sutton.

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