High Stakes and Even Higher Questions: Kalshi’s Gamble on Democracy and Dollars

For as long as American society can remember, the only real-time events that people had the power to bet on were the stock market, sporting events, and, of course, those friendly backroom wagers fueled by just the right amount of liquid courage. But Kalshi, a corporate disruptor in the “prediction market space,” has burst onto the scene like that uninvited guest at a poker night, shaking up the status quo. Describing itself as “the only federally regulated prediction market where investors can trade event contracts tied to real-world events,” Kalshi has essentially rebranded bookmaking for the 21st century—except their version comes with lawsuits, regulators, and some very polished jargon which has led to their controversial yet meteoric rise. Their so-called "contracts" range from betting on the likelihood of a “GTA 6 being released next year” to the everpressing national concern of  “Moana 2’s rotten tomatoes score.” 

While these wagers may seem harmless, Kalshi sent shockwaves throughout the legal and political world during the 2024 Presidential Election, offering bets not just on the ultimate prize—the presidency—but also on key senate, house, and gubernatorial races as well. By inviting users to stake money on the outcomes of real-world events, Kalshi strides into a murky middle ground between traditional gambling and what they boldly describe as "regulated financial speculation." In reality, they’ve entered a game where the house (in this case, federal regulators) isn’t so sure they should be allowed to play at all.

Kalshi’s business model operates under the banner of a “prediction market,” essentially letting users place bets on binary outcomes—“yes” or “no”—for which they get paid if they’re right, with Kalshi trying to convince you it’s more like the New York Stock Exchange, rather than BetMGM. With its Commodity Futures Trading Commission (CFTC) seal of approval, Kalshi has doubled down on this claim insisting it’s not a gambling platform but a “regulated financial exchange.” To the average onlooker, however, this distinction might seem about as convincing as arguing that slot machines are just “random number generators.”

The public perception? As one can imagine, Kalshi has been called “DraftKings 2.0”— but the company is working overtime to shake that image, and for good reason: until recently, betting on elections was explicitly prohibited under federal law due to deep-rooted concerns about corruption, voter manipulation, and the erosion of public trust. Despite these well founded concerns, Kalshi still insists it can revolutionize political forecasting. Founder Tarek Mansour even took a jab at pollsters, claiming that they “have skin in the game but for all the wrong reasons. They’re politically biased, they can be manipulated, and there are conflicts of interest.” Touché. According to Mansour, “people don’t lie with money,” which strengthen’s Kalshi’s ethos that its prediction markets do indeed enhance public understanding of political trends, providing an accuracy that outdated polling simply can’t match. To its founders, this isn’t gambling; it’s a public service in information accuracy. But critics aren’t buying it—literally or figuratively. The idea that real-world events could be classified as commodities stretches the definition of the term so thin you can almost hear the legal framework creaking under the weight of Kalshi’s ambition. If left unchecked, this could pave the way for the commodification of, well, everything. Why stop at elections? Next up: betting on geopolitical conflicts or public health crises. What could possibly go wrong?

Unsurprisingly, the Commodity Futures Trading Commission isn’t entirely sold on Kalshi’s vision of democracy-as-a-commodity, and the two have been embroiled in a classic government vs private sector battle. The regulator has already clashed with the company in federal court, questioning the legality and public interest of event-based contracts. In their most recent showdown, the U.S. Court of Appeals for the D.C. Circuit saw no merit in the CFTC’s argument that Kalshi’s contracts would harm public interest. Kalshi, emboldened, had previously sought permission in June 2023 to allow contracts betting on which party would control the House or Senate, however the CFTC put its foot down, citing concerns about “unlawful gaming” and activities not in the public interest. Kalshi fired back with a lawsuit and won, accusing the regulator of having “exceeded its authority.” 

Despite the various ethical implications, Kalshi’s defenders argue that prediction markets democratize access to information while simultaneously incentivizing civic engagement. Some scholars even believe such markets could improve decision-making by aggregating public sentiment in real time. It’s a seductive argument: why “trust outdated polls when you can put your faith in the collective wisdom of people putting their wallets on the line?” In this view, Kalshi’s platform isn’t a gambling den but a crystal ball for society’s political future.

But for every optimist, there’s a skeptic waving a red flag. Critics warn that prediction markets prioritize profit over public good, risking exploitation in ways that could erode trust in institutions. The commodification of uncertainty—especially in politically or socially sensitive areas—raises ethical questions that are far too pressing to ignore in good conscience. Is this really the future we want? Where democracy becomes just another line item in someone’s investment portfolio?

Ultimately, Kalshi epitomizes a broader tension in modern finance: how to balance innovation with regulation. Every new financial instrument promises revolutionary potential—until someone inevitably yells “scam!” or “Ponzi scheme!” Kalshi’s election betting pushes the boundaries of what’s legally and ethically acceptable, leaving regulators with the unenviable task of deciding whether to embrace this innovation or slam the brakes on it entirely. The stakes? Nothing less than the integrity of democratic processes, public opinion, and the line between speculation and exploitation.

For now, Kalshi sits precariously in the crosshairs—betting not just on the outcomes of real-world events but on its own ability to survive regulatory scrutiny. The ultimate question isn’t just whether prediction markets like Kalshi can succeed but whether they should. Are we witnessing the birth of a new financial frontier, or just the latest act in the age-old circus that is  gambling?

I guess all that’s left to say is: Ladies and gentlemen, place your bets.

Aditya Lodha is a fourth-year student at Brown University who is currently pursuing a concentration in History with a focus in law and society. He is a staff writer for the Brown Undergraduate Law Review and can be contacted at: aditya_lodha@brown.edu!

Maia Eng is a junior at Brown University concentrating in International and Public Affairs. He is an editor for the Brown Undergraduate Law Review and can be contacted at maia_lourdes_eng@brown.edu