Kalshi is the first federally regulated exchange for event contracts. Incorporated as a Delaware LLC on December 10, 2019, it applied for Designated Contract Market (DCM) status to the Commodity Futures Trading Commission (CFTC) a few weeks later on December 27th. Their application was approved almost one year later on November 3, 2020, and Kalshi began operations on June 30, 2021.
In its first year, Kalshi’s contracts focused on economic indicators, international events, COVID-19, and other events where people could hedge risk. They also quickly moved into pop culture with contracts for Billie Elish’s latest album sales, NFL viewership, and Grammy winners. By the end of 2021, Kalshi had offered certain U.S. political events on legislation, Senate confirmations, and U.S. Supreme Court decisions. But there were still no signs of election contracts.
This changed on July 19, 2022, when Kalshi voluntarily submitted political events contracts to the CFTC. Named “Will <party> be in control of the <chamber of Congress>?”, this contract would have been determined by partisan control of Congress with a $25,000 limit per trader.
Kalshi’s letter to the CFTC referenced PredictIt’s election contracts (without specifically naming PredictIt) for two pages. Sixteen days later, on August 4th, PredictIt’s no-action letter was rescinded.
Kalshi requested three 90-day extensions until it finally withdrew the proposal on May 16, 2023. Shortly thereafter, Kalshi self-certified a modified election contract on June 12, 2023. This new contract, “Will <chamber of Congress> be controlled by <party> for <term>?” now had much higher limits starting at $125,000 and going up to $100,000,000 for “Eligible Contract Participants…with demonstrated established economic hedging need.” On June 23, the Commission elected to begin a 90-day review.
You can find more detailed summaries of Kalshi’s two different proposals here.
This article isn’t interested in the different Kalshi proposed contracts but in the public comments for and against them. While not as toxic as Facebook or as juvenile as PredictIt comments, the public’s comments to the CFTC leave a lot to be desired. Some comments read like two competing false flag operations:
- Political bros demanding a government agency allow them to gamble because they want to and will do it anyway.
- Karens outraged that Americans could potentially bet on elections, unaware this has been legal in some form for decades.
Here is a breakdown of public comments:
| Filing | Comments | Support | Oppose | Neutral | Unknown |
| 22-002 | 201 | 152 | 32 | 6 | 12 |
| 23-01 | 1,378 | 346 | 1,005 | 2 | 25 |
| Total | 1,579 | 498 | 1,037 | 8 | 37 |
You can find all the comments, with labels, here.
Labeling the public comments faced several challenges in interpreting an individual’s intent:
- Sarcasm: “Nancy Pelosi is allowed to trade on insider information but WE THE PEOPLE are not allowed to bet on election outcomes? Double standard much” (71490)
- Vagueness: “Do the right thing for American families” (72071) or “Please do the right thing – thanks” (72355)
- Likely fake: Alexandria Ocasio-Cortez (69596) and “Donalt Trump” (72670) seem unlikely to have taken the time, nor made these specific comments.
The solution used was to treat everything literally, no matter how ironic the statement. Vague comments were classified as “Unknown.” All commenters, even Donalt Trump, were assumed to be real. Senator Amy Klobuchar wrote to “express concern” about the election markets (72910), and listed reasons in opposition without specifically asking the Commission to reject the proposal; this was classified as “Oppose.”
The issue of election contracts seemed to generate a knee-jerk emotional reaction and many factually incorrect statements about the proposal. Many people didn’t seem to understand the basic facts. Roughly 648 of the 1,005 comments (64.5%) from 2023 in opposition incorrectly reference this proposal as “allowing” gambling on elections. Prediction Markets like the Iowa Electronic Markets (IEM) and PredictIt, or commercial markets for political futures like the American Civics Exchange (ACE), already exist legally. In the case of IEM, the CFTC granted its no-action letter in 1992.
In defense of the opponents, Kalshi’s 2023 proposed contracts go way beyond the maximum limit of PredictIt or IEM. However, this was rarely brought up, and only mentioned in a single-digit number of opposing comments. A 2023 comment (71439) from Public Citizen’s Executive Vice President and Government affairs lobbyist seems to be based on Kalshi’s 2022 proposal because it references the wrong limits.
The messaging war was pretty lopsided. For the 2023 comment period, 192 comments referenced ‘hedging’ or ‘prediction’ while 1,006 referenced ‘betting’ or ‘gambling.’ This shouldn’t be surprising because it is much simpler for opponents to explain an election contract as betting than for supporters to explain binary options, hedging, or even probabilities to the general public.
And the total number of 498 comments in support could be considered inflated. Christopher Greenwood copied 141 comments from the 2022 comment period, resubmitting them in the 2023 period as his own:
I therefore adopt that comment as my own, and I enter it into the record before the CFTC for consideration. The CFTC cannot ignore this valuable information in coming to its decision now. Ignoring it would be ignoring my comment.
Not all comments were poorly reasoned or factually incorrect. Some notable comments from both Kalshi filings include:
- Academic Group Letter (70761)
- Jorge Paulo Lemann, 3G Capital (69684)
- John Philips, Aristotle (70748)
- Dennis Kelleher, Better Markets (72906)
- Terry Duffy, CME Group (72694)
- Pratik Chougule, Coalition for Political Forecasting (72708)
- Maggie Sklar, Davis Wright Tremaine (72703)
- Dustin Moskovitz, Facebook (69716)
- Steve Suppan, The Institute for Agriculture and Trade Policy (72722)
- Xavier Sottile, Kalshi (72716)
- Sister Bea Eichten, Franciscan Sisters of Little Falls MN (71759)
- Sam Altman, OpenAI (69699)
- Craig Holman, Public Citizen (71349)
- Michael Ortiz, Sequoia Capital (69698)
- Senator Jeffrey Merkley, U.S. Senate (72907)
The nearly 1,400 comments give us a large amount of textual data about public opinion on Kalshi’s election contracts. Sentiment analysis of the various comments would be interesting to explore in the future.