Political Prediction Markets: Bad Law, but Good Policy?

Political prediction markets have been around in limited formats since 1988, but they recently returned to the public consciousness during the 2024 elections as platforms like Kalshi offered trades on the United States presidential and congressional races. The question is: are these trades legal? The Commodity Futures Trading Commission (CFTC) said no, a federal district court said yes, and the answer has implications for the use of prediction markets beyond just elections. To get closer to an answer, this Note examines the statutory source of the CFTC’s authority to review trades that are based on the outcome of events (sometimes called “event contracts”). It concludes that the law is contradictory and unclear, but that political prediction markets benefit the public. For that reason, this Note recommends new language for the relevant part of the Commodity Exchange Act that would narrow the CFTC’s authority to review event contracts and clarify the standards by which the agency decides whether the contracts it reviews are contrary to the public interest.

“All voting is a sort of gaming, like checkers or backgammon, with a slight moral tinge to it, a playing with right and wrong, with moral questions; and betting naturally accompanies it.”

—Henry David Thoreau