Kalshi wins in court to allow legal betting on US elections

Kalshi’s win opens the door for platforms such as Web3-based Polymarket, to enter legally into the market of election predictions. Election betting markets are gaining popularity despite concerns over ethics and possible manipulation. Supporters argue that they provide a more accurate gauge of public opinion than traditional polls. Polymarket has also gained traction by offering a bet pool to determine the identity of Satoshi Nakamoto, Bitcoin’s original creator. Global crypto adoption is on the rise and nearing 8 percent.

Kalshi Wins Court Battle

After a significant legal win, the derivatives exchange Kalshi has listed contracts that allow users to bet on US elections. Tarek Mnsour, the platform’s creator, posted on X on October 7 that traders can legally bet on election results, such as US presidential elections, state winnings, and margins of victory.

It is the first election predictions market in US history to be legal. This opens the door for new platforms to enter the market, such as Web3’s Polymarket.

The Commodity Futures Trading Commission reports that Kalshi self-certified over a dozen betting contracts on elections, and the regulator has approved them. The contracts, which are binary options, include wagers on political outcomes such as whether or not a specific candidate will become a nominee for a certain party, or whether that party will gain a Senate seat during a given year.

After Kalshi’s battle with the CFTC which had previously prohibited the platform to list political event contracts, the approval came after Kalshi’s legal fight. The CFTC had appealed this court decision, and wanted Kalshi to be unable to list these contracts. However, on October 2, the court ruled that Kalshi could indeed list the political event contracts.

Kalshi is still behind Polymarket despite this victory. Polymarket has become the leader in election betting. Polymarket had seen over $1 billion worth of bets placed on the US Presidential election in November, whereas Kalshi’s contracts saw a total volume of $775,000.

Presidential election odds volume (Source: Polymarket)

Some industry analysts claim that while the CFTC has concerns about the election prediction markets, they capture the public’s sentiment better than polls.

The Ethics of Election Betting Markets is a Growing Topic

The CFTC has proposed to ban election derivatives in May 2024. Some industry experts claim that, despite initial fears about manipulations, prediction markets are a more accurate measure of public sentiment.

Harry Crane, a Rutgers University professor, defended the markets recently by saying that they collect diverse data for a more accurate forecasting process than polls which measure only sentiment. He clarified, too, that the markets encourage participants to make predictions about who would win while polls are only a gauge of preference.

The victory of Kalshi in court has reignited debates on the future of prediction market in the US. However, offshore platforms such as Polymarket are already gaining a great deal of momentum. Polymarket may block US users but its election data is quite important and appears even on Bloomberg Terminal. CFTC chair Rostin Behram has however warned Polymarket that it could face enforcement action if its US footprint increases.

New accounts added to Polymarket every month (Source:Dune )

Cantrell dumas, from Better Markets is among those who are worried that betting markets of this size could be used to commercialize elections, and erode public confidence in democracy. The critics also claim that strict supervision is needed to prevent fears of manipulation of elections, particularly in the current climate of public distrust after allegations of fraud during 2020’s election.

Even with these worries, some people still believe prediction markets are beneficial to the public because they provide a more accurate and objective forecast for election results. The ethical implications of gambling on sensitive issues, such as elections and conflicts, are still in dispute.

Ethereum’s co-founder Vitalik Buterin addressed these concerns recently, and said that gambling becomes a problem when it encourages insider gains for harmful activities.

Polymarket Bets Satoshi Nakamoto’s Identity

These betting sites offer more than just elections. Polymarket listed Len Sassaman as an American computer science as the frontrunner to reveal Satoshi as Bitcoin’s founder in an HBO documentary. Cullen Hoback, a filmmaker, directed the documentary Money Electric: Bitcoin Mystery. The documentary is scheduled to air in October.

While neither Hoback or HBO has confirmed the identity of Nakamoto, social media teasers suggest that there may be an important revelation.

Satoshi, the man HBO will identify in its documentary (Source:Polymarket )

Since the HBO documentary’s announcement, a Polymarket trading pool asking, “Who will HBO document identify as Satoshi?” attracted an impressive amount of interest. As of October 4, it had already attracted $389,738 in total. Top suspects include Hal Finney Adam Back Craig Wright and Nick Szabo. On Oct. 7, Len Sassaman was the top-ranked candidate.

Sassaman died in 2011, at age 31, after a long battle with cancer. He was well-known for his contributions to the privacy-enhancing technology and Cypherpunk movements. Although there’s no evidence directly linking him to Bitcoin, in a post on Medium from 2023 it was speculated that he could be Nakamoto because of his experience with open-source advocacy.

The rules of the Polymarket Pool state that if Sassaman’s role is credited as being the main developer of Bitcoin in the film, then the market is likely to resolve “Yes”. If another person or group are identified or Sassaman has a joint responsibility, the pool will be resolved to “No.”

Crypto Adoption Globally Nears 8%

Crypto adoption is also gaining momentum, just as prediction markets have. According to MatrixPort, global crypto adoption has reached a significant milestone. Currently, 7.51% (or a quarter of) the population uses digital currencies. This report predicts this number could exceed 8% by the year 2025. It also suggests that cryptocurrency could soon move from being a niche to becoming a part of financial mainstream systems.

This growth is driven by institutional involvement. BlackRock, for example, has helped to build trust in the digital asset market. This is helping boost adoption. Markus Thielen of 10x Research explained that Bitcoin historically has driven the market whenever new products like Bitcoin Spot ETFs were introduced. The evolution of Bitcoin has been a key factor in the increase in institutional interest.

Bitcoin’s importance on the cryptocurrency market is also credited to its role as an economic store of value in times of uncertainty. Thielen noted that economic crises, such as the European Debt Crisis or increasing US debt, increased demand for Bitcoin. This positioned it to be a hedge in case of potential trade wars or recessions.

The report, despite its optimistic predictions, also highlighted several obstacles to a wider adoption of crypto. The risks are still serious. Regulatory obstacles, volatility in the market, and concerns about security, such as hacks and scams. Markets could be destabilized by institutional investors through massive sell-offs in times of macroeconomic changes.