Kalshi Triumphs in Court Allowing Legal Betting on US Elections

Kalshi’s victory opens doors for other platforms like Web3-based Polymarket to legally enter the election prediction market as well. Despite concerns about the ethics and potential manipulation of election betting markets, supporters argue they offer a much more accurate measure of public sentiment compared to traditional polls. Polymarket is also gaining traction with a betting pool on the identity of Bitcoin’s creator, Satoshi Nakamoto, while global crypto adoption continues to rise, and is nearing 8%.

Kalshi Wins Court Battle

The derivatives exchange Kalshi officially listed event contracts for betting on US election outcomes after a major legal victory. The platform’s founder, Tarek Mansour, announced on Oct. 7 in an X post that users can now legally trade on various election outcomes, like the US presidential election, state winners, and margin of victory. 

This is the first time in US history that an election prediction market has been legally permitted. It certainly opens some doors for other platforms, including Web3-based Polymarket, to enter the market.

According to the Commodity Futures Trading Commission (CFTC), Kalshi has self-certified more than a dozen election betting contracts, with approval from the regulator. These contracts are structured as binary options, and include bets on specific political outcomes, like  whether a candidate will be a party’s nominee or whether a political party will win a Senate seat in a particular year. 

The approval happened after Kalshi’s legal battle against the CFTC, which previously prevented the platform from listing political event contracts. Although the CFTC appealed the court’s decision and wanted to prevent Kalshi from listing these contracts, the court ultimately ruled in Kalshi’s favor on Oct. 2.

Despite this legal win, Kalshi still lags behind Polymarket, which has established itself as the leading platform for election betting. Over $1 billion in bets had been placed on the November US presidential election on Polymarket, while Kalshi’s equivalent contracts have seen a volume of around $775,000. 

Presidential election odds volume (Source: Polymarket)

While the CFTC is very concerned that election prediction markets could undermine the integrity of elections, some industry analysts argue that these markets capture public sentiment more accurately than traditional polls. 

Debate Grows Over Ethics of Election Betting Markets

In May of 2024, the CFTC proposed banning election betting derivatives. Despite initial concerns about manipulation, some industry experts argue that prediction markets offer a much more reliable measure of public opinion. 

Rutgers professor Harry Crane recently defended these markets by claiming they aggregate diverse information for more accurate forecasting than polls, which only measure sentiment. He also clarified that markets incentivize participants to predict who will win, while polls only gauge preference.

Kalshi’s victory in court rekindled debates about the future of prediction markets in the US, but offshore platforms like Polymarket have already gained a lot of traction. While Polymarket blocks US users, its data on US elections is still quite influential, and even appears on the Bloomberg Terminal. However, CFTC Chair Rostin Behnam has warned that Polymarket could also face enforcement actions if its US footprint grows.

Monthly new accounts on Polymarket (Source: Dune)

Critics, including Cantrell Dumas from Better Markets, are concerned that large betting markets could commercialize elections and undermine public trust in democracy. They also argue that strict oversight is necessary to avoid amplifying fears of election manipulation, especially in a climate of low public confidence after accusations of election fraud in 2020. 

Despite these concerns, there are still people like Crane who believe that prediction markets benefit the public by providing a much more objective and accurate forecast of election outcomes. However, the ethical implications of betting on sensitive topics, elections or conflicts, is still a point of contention. 

Even Ethereum co-founder Vitalik Buterin recently addressed some of these concerns, and suggested that betting becomes problematic when it incentivizes harmful actions for insider gain.

Polymarket Bets on Satoshi Nakamoto’s Identity

Elections are not the only events on these betting platforms. Polymarket had Len Sassaman, an American computer scientist, as the leading candidate to be revealed as Bitcoin’s creator, Satoshi Nakamoto, in an upcoming HBO documentary. The documentary is titled Money Electric: The Bitcoin Mystery, and is directed by filmmaker Cullen Hoback. It is set to air on Oct. 8. 

Although neither Hoback nor HBO have actually confirmed that the film will definitively reveal Nakamoto’s identity, teasers and social media posts suggest that there could be a major revelation.

Who will HBO doc identify as Satoshi (Source: Polymarket)

A Polymarket trading pool asking “Who will HBO doc identify as Satoshi?” has gained a lot of traction since the documentary was announced, and already attracted a total volume of $389,738 as of Oct. 4. The top suspects in the betting pool include names like Hal Finney, Adam Back, Craig Wright, and Nick Szabo. However, the frontrunner was still Len Sassaman on Oct. 7.

Sassaman passed away in 2011 at the age of 31, and was known for his involvement in the Cypherpunk movement and contributions to privacy-enhancing technologies. While there is no direct evidence connecting him to Bitcoin’s development, a 2023 Medium post speculated on his potential role as Nakamoto due to his background in open-source advocacy and cryptography.

According to the rules of the Polymarket pool, if the documentary names Sassaman as the primary developer of Bitcoin, the market will resolve to “Yes.” If someone else or a group is identified, or if Sassaman is mentioned as having a shared role, the market will resolve to “No.” 

Global Crypto Adoption Nears 8%

While prediction markets are picking up steam, the same could be said for crypto adoption. Global crypto adoption is nearing a major milestone, with 7.51% of the world’s population now using digital currencies, according to a report by MatrixPort. The report forecasts that this figure could surpass 8% by 2025, and suggests that crypto could very soon transition from a niche market to a more integral part of mainstream financial systems.

Institutional involvement is a key factor driving this growth. Financial firms like BlackRock have helped build trust in digital assets, which is boosting adoption. Markus Thielen, the founder of 10x Research, explained that Bitcoin has historically driven market rallies whenever new financial products, like Bitcoin spot ETFs, were introduced. This evolution has played a central role in increasing institutional interest.

Bitcoin’s role as a store of value during economic uncertainty also cemented its importance in the global cryptocurrency market. Thielen pointed out that periods of economic challenges, like the European debt crisis or rising US debt, boosted demand for Bitcoin, positioning it as a hedge against potential recessions or trade wars.

Despite these optimistic projections, the report also shed some light on several challenges to wider crypto adoption. Regulatory hurdles, market volatility, and security concerns, like hacks and scams, still pose serious risks. Institutional investors could also destabilize markets through large sell-offs during macroeconomic shifts.