U.S. Election Betting: Regulated Presidential Markets Are Live, and Tiny Compared to Polymarket’s

Two
U.S.-regulated,
dollar-denominated
prediction
markets
began
taking
bets
on
the
presidential
race
this
week,
with
a
month
to
go
before
Election
Day.

Kalshi,
which
fought
a
long
legal
battle
with
the
Commodity
Futures
Trading
Commission
to
offer
election
contracts
in
the
U.S.,
launched
its
presidential
markets
on
Friday,
following
Wall
Street
powerhouse
Interactive
Brokers’
(IAB’s)
ForecastEx,
which
did
so
the
day
before.

So
far
volumes
are
modest
at
both
CFTC-supervised
exchanges,
with
$344,101
worth
of
contracts
traded
on
Kalshi
and
$346,000
on
ForecastEx.
By
comparison,
more
than
$1.2
billion
has
been
staked
on
the
race
between
Kamala
Harris
and
Donald
Trump
at
Polymarket,
the
crypto-powered
prediction
market
platform,
which,
despite
prohibiting
U.S.
users
under
a
CFTC
settlement,
has
reaped

record
volumes
this
year
while
Kalshi
and
IAB
sat
on
the
sidelines
awaiting
legal
clarity.

“It
will
be
hard
for
the
two
sites
to
catch
up,
but
that
is
not
entirely
impossible,”
said
Koleman
Strumpf,
an
economics
professor
at
Wake
Forest
University
in
North
Carolina.
For
one
thing,
“some
traders
may
switch
from
Polymarket
to
the
other
sites,”
he
told
CoinDesk.
(Despite
geofencing,
American
traders
have
reportedly
been

using
VPNs
to
access
Polymarket.)

Moreover,
“more
than
half
of
all
trades
will
happen
between
now
and
election
day
if
history
is
any
guide
(and
there
is
more
volume
for
close
races
which
this
looks
to
be),”
said
Strumpf,
who
has
studied
the

history
of
election
markets.

However,
Aaron
Brogan,
a
managing
attorney
at
Brogan
Law,
said
that
Polymarket
has
two
advantages
beyond
being
the
first
mover.

“Polymarket
is
theoretically
accessible
to
people
all
over
the
world.
In
contrast,
Kalshi’s
products
aren’t
available
to
‘foreign
nationals‘
and
certain
other
excluded
groups,”
he
said.
“Second,
Polymarket
doesn’t
have
explicit
position
limits,
but
Kalshi’s
rules
do.
In
this
case,

the
limit
is
quite
high,
but
it’s
conceivable
that
this
could
be
a
limiting
factor
on
total
market
size.”

Early
afternoon
Friday
in
New
York,
prices
of
“yes”
shares
for
Harris
were
trading
at
51
cents,
signaling
traders
give
her
a

51%
chance
of
winning.
Trump’s
odds
on
Kalshi
were
at
50%.

Harris
was
also

leading
Trump
on
ForecastEx,
but
by
a
wider
margin,
53-47.
Meanwhile,
on
Polymarket,
the
two
candidates
were

neck
and
neck,
at
49%
each.

Harry
Crane,
a
statistics
professor
at
Rutgers
University
in
New
Jersey,
said
these
differences
were
not
very
meaningful.
“We’re
used
to
using
polls
in
election
forecasting,
and
with
polls,
there’s
a
well-understood
margin
of
error,
three
percentage
points
usually,
depending
on
sample
size,”
he
said.

Similarly,
in
markets
there
is
sometimes
a
“margin
of
inefficiency”
where
any
profits
to
be
made
from
arbitraging
price
differences
are
not
worth
the
effort.
“There’s
no
sufficient
incentive
for
anyone
to
scoop
up
the
penny
that
the
difference
might
present.”

But
prediction
markets
“don’t
need
to
be
identical
to
be
useful
for
forecasting,”
Crane
said.
Over
time,
observers
can
collect
data
on
these
markets,
determine
which
ones
had
stronger
predictive
track
records,
and
come
up
with
a
consensus
forecast
that
might
put
more
weight
on
one
market
than
another,
he
said.

Kalshi
sued
the
CFTC
last
year
after
the
agency
denied
its
application
to
list
contracts
on
which
party
would
control
each
house
of
Congress.
The
company
won
the
case
(which
the
CFTC
is
appealing)
and
listed
the
congressional
contracts
on
Sept.
13.

They
traded
for
only
a
few
hours
before
the
appeals
court
granted
the
CFTC
an
administrative
stay
freezing
the
contracts,
which
it

lifted
Wednesday.
Emboldened,
the
company
not
only
revived
the
congressional
contracts
but
self-certified
the
presidential
one.
Self-certification
is
the
process
whereby
CFTC-regulated
entities
list
products
without
the
agency’s
prior
approval.
IAB,
which
started
ForecastEx
over
the
summer,
quickly
followed
suit.

The
CFTC,
which
is
also
considering
a
proposal
to
ban
political
event
contracts
at
the
exchanges
on
its
watch,
has
asked
the
appeals
court
to

expedite
the
case.
Among
other
reasons,
the
agency
said
its
proposed
regulation
“may
be
substantially
impacted
by
this
Court’s
decision
on
the
merits.”

But
it’s
apparently
given
up
on
stopping
these
contracts
from
trading
before
the
election.
Its
proposed
timetable
would
have
briefs
filed
by
Nov.
22
(more
than
two
weeks
after
Americans
cast
their
votes)
and
oral
arguments
heard
on
Dec.
2.