Election betting is newly legal — and risks getting confused with polls

Betting on election outcomes is now legal in the U.S., and as easy as wagering for a sports team to win. But experts warn against mistaking betting markets for polls.

A handful of companies, including Kalshi and Interactive Brokers, have been allowing users to tap their way to wagering on Donald Trump or Kamala Harris to win the election. Just days before the election, even stock-trading platform Robinhood jumped in on the party, offering a betting market of its own. The companies set their own betting limits, with Kalshi letting users wager as much as $100 million.

“We believe event contracts give people a tool to engage in real-time decision-making, unlocking a new asset class that democratizes access to events as they unfold,” Robinhood said in a statement Monday. 

Election bets were approved legally just weeks ago, as the 2024 race headed into its home sprint. The Commodity Futures Trading Commission, which regulates financial contracts that bet on events, has consistently blocked applications to open up bets on elections under Republican and Democratic administrations alike.

But that changed last month when a U.S. district court sided with Kalshi in a lawsuit the company filed against the CFTC, arguing that it should be allowed to offer the contracts. The ruling cleared the way for Kalshi to open betting markets on the election while the CFTC appeals. The ongoing legal wrangling could still lead to a shutdown of U.S. election betting markets, but not until after the 2024 vote.

In the meantime, “it pulls us, the CFTC, into the responsibilities of being an election cop,” Chairman Rostin Behnam said last week, maintaining that the agency would respect the court decision while election bettors place their wagers. Millions of dollars have since flooded the markets. Kalshi said bets on the general election hit $30 million within its first three weeks, surging to $139 million by Friday.

Overseas, where bets on American elections are nothing new, billions of dollars have been circulating.

Crypto-based betting platform Polymarket is hosting over $2 billion in bets, likely from foreign traders. It’s technically banned to users in the U.S., where the CFTC slapped the company with a $1.4 million fine in January 2022 for taking election bets as an unregistered platform, issuing a cease and desist that effectively barred it from the domestic market. But with private, encrypted internet networks readily available, industry watchers say Americans may still be able to access foreign platforms.

PredictIt, a project from Victoria University of Wellington in New Zealand, offers contracts of its own. The platform is available to Americans, but with a betting limit of $850. Founder John Aristotle Phillips says having “skin in the game” forces users to remove the “spin and emotion” from their expectations of election outcomes.

But Phillips says the public should interpret prediction markets carefully when it comes to politics.

“A market will give you the odds of an event happening,” he said. “It has nothing to do, and can’t give you insight, in terms of what the margin of victory or loss is going to be, which is what a poll is intended to show.”

In many of these markets, bets are quoted per wagered dollar. So if a general election wager shows 52 cents for one candidate winning, then 52 cents successfully wagered on that candidate would return $1 — a payout of 48 cents.

But if pricing shows one candidate at 52 cents over the other candidate at 48 cents, that does not mean the former is projected to win 52% of the popular or electoral vote.

Polls ask prospective voters whom they will vote for, so if 52% of voters tell a pollster that they support one candidate and 48% say they support the other, then a margin of 4 percentage points can be concluded among that sample group.

NBC News doesn’t cite betting odds as proxies for political polling. Odds and gambling platforms don’t use methodologies used by traditional political polling, and therefore are not substitutes for political polls.

Nonetheless, public discussion around betting market odds has blurred the lines, with prominent voices at times confusing the two.

In early October, multibillionaire Trump donor Elon Musk cited Polymarket odds and posted on X that the former president was “leading” Harris by 3%.

But Polymarket showed only that bettors viewed the odds of Trump winning as 3 percentage points higher than the opposite outcome, not that Trump was ahead of Harris by 3 points among actual voters. Musk asserted that the Polymarket odds were “more accurate than polls,” even though users of the platform are likely entirely foreigners who can’t vote in U.S. elections.

Polymarket also attracted scrutiny after large bets by four accounts were placed in late October. As The Wall Street Journal first reported, the bets appeared to surge the betting odds for a Trump win. Polymarket later said all those wagers were made by a single French national. The company didn’t respond to a request for comment.

The CFTC permits only U.S. residents to use the newly opened election betting markets, meaning many bettors on the platforms are also potential voters.

Kalshi lets bettors wager as much as $100 million on the outcome of the general election, but the company says any effort to thumb the scale by placing huge bets should be washed out by the market.

“If the truth is actually 50-50, and the market is priced at 60-40, there’s a huge incentive, like multi-tens of millions of dollars, to bring the prices back. And this is what happens in these markets,” Kalshi founder Tarek Mansour said.

He added that unlike Polymarket, Kalshi is required to comply with laws like Know Your Customer, under which users must submit personal data to help head off potential financial crimes. “We know if they’re bad actors and we enforce rules,” Mansour said.

Nonetheless, Adam Cochran, founder of venture capital fund Cinneamhain Ventures, says he worries about how voters perceive election betting odds. Prediction markets should be merely a “data point in how we evaluate elections,” he said, “just one slice” of where the momentum may be going in a campaign.

“Politics in America and, growingly, around the world, has become more like supporting your favorite sports team,” Cochran said.

Mansour acknowledged it’s a “fair concern” that the general public might mistakenly see betting odds as the size of a candidate’s lead.

“This is different than a poll. There’s been a little bit of misconception,” he said.