By Pratik Chougule
Kalshi’s proposal to offer election contracts has not only been rejected by the CFTC, it has resulted in even stricter regulations against political betting.
Kalshi’s decision to persist with a strategy that keeps inviting backlash is symptomatic of a broader issue. The company’s incentives are, at best, imperfectly aligned with those of the political betting community.
As a start-up, Kalshi’s highest priority is to deliver for its investors and grow as fast as possible to stay ahead of its competitors.
Election contracts are just one of the many avenues Kalshi is pursuing to meet their financial goals.
While political and election contracts could be a game changer for Kalshi, the company’s ambitions extend well beyond this area. This leads them to a different risk-reward calculation from the political betting community.
Whereas Kalshi has strong incentives to move fast against long odds, the political betting community has more incentives to play the long game. While additional political betting contracts on Kalshi would be beneficial to retail traders, there are already other prediction markets, sportsbooks, and private counterparties who can provide action in the short-term.
For the political betting community, it is less important to liberalize regulations quickly as it is to avoid a backlash that could restrict the freedoms we already have. This calls for a more defensive strategy that is mindful of regulatory blowback.
The political betting and forecasting community is diverse and the interests of its various groups will not always align, even when they are acting in good faith.
Companies in the space, notably Kalshi, have outsized influence by virtue of their financial resources and connections to regulators.
This is why advocacy groups such as the Coalition for Political Forecasting are important. It is critical for the political betting community to have its own advocates, particularly at junctures when their interests are not entirely in line with companies in the space.
For further thoughts on these issues, see the Coalition’s report as well as my interview with Mick Bransfield at Star Spangled Gamblers.
Pratik Chougule is the executive director of the Coalition for Political Forecasting. Follow him on Twitter @pjchougule
