An election betting ad appeared on screen during coverage of former President Donald Trump’s Madison Square Garden rally this weekend on Right Side Broadcasting Network, a conservative media company.

“Bet on the American election,” Kalshi’s ad read as Trump spoke on stage. “Bet $100 on Trump and get $175.”

More than $100 million has been legally bet on the presidential race on the platform, days before Election Day. This explosion in legal betting comes after a federal appeals court earlier this month allowed KalshiEX LLC, an online betting company, to open an election prediction market.

The company’s CEO, Tarek Mansour, told NPR his election market shows a 63% chance of Trump winning as of Tuesday. – is a “mechanism for truth” and helps ordinary people protect themselves against unpredictable political risks. But critics like Sen. Jeff Merkley (D-Ore.) have called the legal decision a “huge mistake” that harms American democracy.

Kalshi is still fighting federal regulators in court. But retail investment platform Robinhood also started offering bets on election contracts this week. That leaves Americans free to place tens of millions of legal election bets, with no idea how they will affect one of the closest and most contentious presidential elections in decades.

Betting on US elections

Betting on the US presidential elections is nothing new. Betting on presidential candidates was common in the early 20th century. New York City gambling commissioners controlled these markets at a place called the New York Curb Exchange.

Not only did betting occur, but the markets were quite accurate during an era before scientific political polling, according to former NPR gambling correspondent and current editor Keith Romer.

“Of the 15 presidential elections between 1884 and 1940, the betting market correctly calls the race in 11,” Romer told NPR. Planet Money. “It’s too close to say three. And they’re only wrong about one.”

Major newspapers, such as The New York Times, would publish betting odds as a source of information, Romer said. But in the second half of the 20th century, during the advent of scientific surveys and a series of prohibitive gambling laws, electoral betting fell out of favor.

In recent years, prediction markets have recovered electoral betting. On the social media platform

So far, $2.5 billion has been bet on the presidential elections at Polymarket, which also gives the former president a 66% chance of electoral victory.

Kalshi offers Americans a legal platform for their bets for the first time, which CEO and co-founder Mansour says gives voters accurate information, unlike political polls.

Rajiv Sethi, an economics professor at Barnard College who has been studying these markets for years, said it’s “the jury’s still out” on whether prediction markets are better than traditional political polls, but it’s close.

“They make products that are actually quite competitive with the top models,” Sethi said.

Affecting election results?

Mansour, the chief executive, said the goal is to expand election betting to the general public, similar to the creative financial vehicles that are available to hedge risks for “high net worth individuals” at investment banks such as Goldman Sachs, his former employer.

He gave the example of an environmental company protecting itself against the election of a candidate who proposes drastically cutting climate change initiatives.

“People can do something about it now,” Mansour said. “They can reduce their exposure and volatility to events that they really have no control over.”

When asked about nefarious bets aimed at falsely inflating a given candidate’s odds, Mansour said election markets are “self-correcting” because bettors will see an opportunity to make money on an inflated outcome.

“The only result is basically that the people who tried to manipulate in the first place lost a lot of money,” Mansour said during an interview conducted when Kalshi’s odds mirrored those in public polls.

Mansour admitted that election betting is not a zero-risk proposition, but said Kalshi is federally regulated, meaning regulators could intervene if someone tried to manipulate a market.

“Everything is super transparent and everyone can see everything you do and know your name and your address and what you’re doing and the government is monitoring,” Mansour said. “It seems like a pretty bad place to try to do any of these things.”

Sethi, Professor Barnard, They largely agreed, citing a 2012 case when an anonymous person bet $7 million to increase the odds of then-Republican presidential candidate Mitt Romney winning the election, only to have it fail when other gamblers caught on. But Sethi said the possibility of manipulation still exists.

“Your belief about whether a candidate is viable, doing well, and likely to prevail can affect things like fundraising, support, enthusiasm, volunteer effort, etc.,” Sethi said. “These things can affect the actual outcome of the election.”

Andrew Caballero-Reynolds/AFP via Getty Images

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AFP via Getty Images

‘A big mistake’

With a week until Election Day, Kalshi’s market favors Trump by more than 30 percentage points, while most political polls show Harris and Trump statistically tied. This misalignment has raised questions about the accuracy of these markets.

Merkley, the senator from Oregon, has opposed Kalshi from the beginning and has proposed an invoice in Congress to ban all electoral betting.

“Allowing election betting is a big mistake,” Merkley told NPR. “It turns elections from a place where you exercise your principles to a place where you exercise your pocketbook. It corrupts our American elections.”

Beyond the moral challenge, Merkley said the law prohibits it. He says it is against the Regulations. 40.11 of the Commodity Futures Trading Commission, which prohibits transactions involving “terrorism, murder, war, gambling, or an activity that is illegal under any state or federal law.” The CFTC is fighting Kalshi in court.

“Gambling involves betting on the outcome of a competition,” Merkley said. “An election is a contest. These are not raw materials. This is not oil. This is not money.”

Kalshi’s Mansour said he knows election betting carries a stigma of corruption, but argued the criticism doesn’t hold water.

“We fight for these markets not because we think they threaten electoral integrity,” Mansour said. “On the contrary, we believe they promote it.”

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