Seven years down the line, a topic has arisen that has potential to shake up the US betting market, that being political betting markets and the drama around Kalshi, an events prediction platform.
For overseas operators, including many from the UK, the US has posed a lucrative but highly challenging market for the past few years, with only a handful of international players being able to find their way in a sector dominated by FanDuel and DraftKings.
The fact that it is an extensive regulatory debate around political betting, chiefly around Kalshi but with Crypto.com and Robinhood also throwing their hats into the ring, may come across as unusual for some more uninformed observers in places like the UK. This is because political betting is an established and popular market in the country.
Looking at US-UK comparatives, William Kedjanyi, Lead Politics Analyst at Star Sports, observes that there has been ‘big growth’ in demand for politics betting in the US, but in the UK demand is so high the firm is ‘asked for more markets than ever before – to the point where punters can even set agendas’.
“Recent years have spurred this on as well with punters and oddsmakers often thinking of new angles that can be taken,” he adds, citing ‘volume and choice’ as being key factors driving British punters’ enthusiasm for political bets.
“Every election will have a variety of markets which mean that even the most uncompetitive looking scenario can be turned into a competitive and interesting market – think handicaps, seat spreads, betting without the favourite and also match bets in certain elections.”
In contrast to the UK, politics betting has been strictly prohibited from US regulated betting markets – of the 39 US states which allow some of regulated betting, with Missouri set to join the crowd later this year, none allow wagering on political outcomes.
The success Kalshi and others have found in their new ‘event contracts’ products, however, shows that Americans share the enthusiasm Britons and others have for a political flutter. The huge amount of attention US politics has received in the past few years, even more so than usual, may have contributed to this demand.
Donald Trump’s brash, often controversial and unpredictable political nature, alongside his 2016 election win, in which he flipped pollsters expectations upside down, have made political speculation an attractive prospect for punters.
“It’s no surprise at all,” Kedjyani says, discussing the impact of widely publicised US elections over the 2010s and 2020s.
“Especially as US elections often have huge personalities that influence how much they are noticed by people who aren’t political obsessives. There’s a long history of betting on presidential elections and with the Obama and Trump factor, that has increased a lot too.”
Kalshi forcing a regulatory review
So, to those unfamiliar with the market dynamics and legal terms of US betting, what’s the deal with Kalshi? With demand for politics betting high in the US, but no legal regulated means for customers to find it, Kalshi has stepped in to meet this demand with its event contracts.
Rooted in financial services, event contracts do what they say on the tin – they allow customers to speculate on the outcome of a given event for a financial return, anything from whether it’s going to rain tomorrow to which football club will win tonight’s UEFA Europa League final to who will win the 2028 US presidential election.
Prediction markets like this are not anything new, and neither is the controversy around them. Polymarket is one of the world’s biggest prediction markets and late last year was raided by the FBI, which claimed it had allowed US citizens to wager on the outcome of the 2024 election in violation of laws around political betting.
Kalshi and its events contracts have fared much better than Polymarket, perhaps partly aided by the fact Donald Trump Jr sits on its board and the Commodities Futures Trading Commission (CFTC) is taking on a much more hands off approach to regulation under the Trump 2.0 administration.
A former Kalshi board member, Brian Quintenz, has also been nominated as Chair of the CFTC, though this is still pending regulatory approval. Amidst these changes, as well as significant internal turmoil at the regulator, it appears to be taking a hands off approach to event contracts.
Earlier this month, it secured approval from a Washington DC court to drop its appeal against a legal decision in favour of Kalshi back in September 2024. Last year’s decision saw the Kalshi fight back against the CFTC’s attempts to block its elections contracts product, with the firm accusing the regulator of overstepping its responsibilities.
With the CFTC’s appeal now dead and buried, this leaves Kalshi going up against the state regulators of Maryland, Nevada and New Jersey, having filed lawsuits against cease and desist orders issued by all three. It has secured preliminary injunctions in the latter two while awaiting the outcome of a hearing in Maryland later this month.
In each case, judges heard the argument that it is the CFTC which has jurisdiction over Kalshi’s product, and not the state regulators. This could turn the entire model of state-led regulation in the US on its head, with judges siding with a federal decision rather than the remit of state Gambling Commissions.
“Litigation over the legality of Kalshi’s sports event markets is perhaps the most significant legal issue for sports betting in nearly a decade,” says James Kilsby, Chief Analyst at Vixio Regulatory Intelligence.
He adds: “At stake is whether regulation of sports wagering will continue to be a matter for state and tribal governments to determine, or whether there will be a new paradigm of federal regulation that enables licensed exchanges to operate across all 50 states under a framework that does not mesh with state laws on traditional forms of gaming.”
A new prospect for European firms?
The prospect of Kalshi rolling out its event contracts products, across both sports and politics markets, leaves a lot of regulatory factors for both domestic and overseas firms to consider – not least among these being the potential opportunity this saga may present.
Many European firms have attempted to set up shop in the US, and many have failed. Most, if successful, either have to depend on a big budget, like Flutter Entertainment did when it purchased market leader FanDuel, or carve out a more niche segment of the online betting market, like bet365.
Others, like Betfred and Unibet, have struggled to stand out in a highly competitive space, and one in which companies have to navigate complex and varying gambling laws from state-to-state.
The prospect of launching a CFTC-approved events contract product instead could be the perfect remedy for this, should the regulator fully endorse the products. Operators would no longer have to deal with multiple state commissions and different rules and requirements across borders, instead taking on the whole market with a federally-approved event contract.
Some have already looked into doing this. Flutter, which already owns a successful exchange in Europe in Betfair, has openly stated that it is looking at the prospect. BetMGM CEO Adam Greenblatt has also said that the firm will look into event contracts “if required”, while also noting his firm’s part-owner Entain’s experience of dealing with politics betting trading due to its experience as a UK/EU founded enterprise.
But could things go the other way around? Could we see this American-originated events contract craze take off overseas? As discussed earlier, politics betting is already a popular product in markets like the UK, with four general elections, five Prime Ministers and a once-in-a-general referendum in 10 years providing plenty of betting opportunities.
“They’ve had a big effect,” says Star Sports’ Kedjanyi. “The amount of news that politics has made and the level of coverage over the past few years, especially during the Brexit period, has opened more opportunities for headline markets (next leaders, elections, by-elections, dates of significance) and then niche markets too (Parliamentary votes etc).”
Kalshi is a US enterprise, and while it has expressed a keenness to expand its offering to non-US citizens such a move will require regulatory approval. It is pure speculation at this point whether we can expect event contracts in markets like the UK, should they find success for them in a more regulatory-light US.
The prospect this competition could bring, as well as the competition it already poses for UK firms in the US, should leave some food for thought though, along with the regulatory element.
