Should Betting on Elections Be Legal?

As pundits were sharing sometimes wildly different takes on how Kamala Harris and Donald Trump performed in Tuesday’s presidential debate, traders were putting money on which candidate would win the election. Those bets also told a story about the debate: On both PredictIt and Polymarket, two so-called prediction markets, the odds were swinging toward Harris.

Screenshots of the markets were seemingly everywhere — across social media, embedded in news articles, and cited by television anchors.

You’ll be hearing more about them. Platforms that facilitate wagers on politics have largely operated offshore because they were prohibited in the United States. But on Thursday, a company called Kalshi was briefly allowed to take bets from Americans on November’s elections.

Within hours of a U.S. District Court giving Kalshi the green light to offer election contracts — which regulators had tried to block — the company had posted what its C.E.O. called “the first trade made on regulated election markets in nearly a century.”

Shortly after that, the popular trading platform Interactive Brokers announced that it planned to allow similar wagers.

A federal appeals court has since temporarily blocked the bets. But the U.S. District Court decision has essentially opened the door for legal gambling on politics.

People who run predictive markets say regulated election betting could provide better forecasting data and a valuable way for businesses to hedge election risk. Detractors say such markets are prone to manipulation and bad for democracy.

Some background. Kalshi and platforms like it are designated contract markets regulated by the Commodity Futures Trading Commission. Kalshi sued when the agency tried to block it from offering contracts that would allow wagers on which political party will control the House and Senate in 2025. A federal judge sided with the company, saying the C.F.T.C. didn’t have authority to block the contracts. She lifted a temporary stay of her decision on Thursday.

The C.F.T.C. had previously proposed a rule that would ban election bets, which is now up in the air.

The big fear is market manipulation. Last week, a group of traders appeared to attempt a scheme on Polymarket that involved betting heavily that Harris would win the election. Their objective seemed to be to artificially increase her odds of winning so they could win a separate bet based on those odds.

A group of lawmakers including Senators Jeff Merkley of Oregon and Elizabeth Warren of Massachusetts, both Democrats, spelled out the most potentially dangerous ways that such markets could be manipulated in a letter to the C.F.T.C. last month. They wrote that such markets could allow “billionaires to wager extraordinary bets while simultaneously contributing to a specific candidate or party, and political insiders to bet on elections using nonpublic information.”

It’s not clear that these markets are easy to manipulate. During a hearing on the case, Kalshi’s lawyer pointed to the Polymarket example to highlight that the scheme ultimately didn’t work. After a short spike in Harris’s odds, the market corrected, and the potential market manipulator lost.

When researchers at the University of Arizona and University of Kansas looked at three historical examples of attacks on political stock markets, they found a similar pattern. After an initial jump, prices soon returned to normal. They looked at the same phenomena in modern prediction markets. “Our evidence suggests that manipulating political stock markets is difficult and expensive to do for more than a short period,” they wrote in a working paper about their analysis.

Predictive markets say election bets are valuable. Instead of asking people whom they will vote for, like a poll, they ask people who they think will win, which some argue produces a better prediction. Rajiv Sethi, an economist at Barnard College who has studied how prediction markets fared against statistical models in predicting outcomes in the 2020 and 2022 elections, says that “the jury is still out” on which is more accurate.

It’s clearer that markets can provide different types of information, he said. For example, they’re much faster than polls or statistical models, and they can more easily pick up on signals in uncharted waters, like a presidential candidate’s stepping out of the race just months before Election Day.

Some see election bets as a useful hedge. Angelo Lisboa, a managing director at JPMorgan Chase, wrote to the C.F.T.C. in favor of Kalshi’s filing to list political event contracts. He argued that such markets could provide an accessible hedge for election risk. A green energy start-up, for example, could place a bet on Trump, who has said he would reverse many of President Biden’s climate policies if elected in November.

“Large banks offer these to high-net-worth and ultrarich clients, Kalshi is not the first to wonder how impactful it would be to bring these capabilities to the rest of the population,” Lisboa wrote.

Permitting election betting would raise difficult questions for regulators. Should a contract on a small local race have a different position limit from one on who controls Congress? What happens if an election isn’t certified?

Rostin Behnam, the chairman of the C.F.T.C., has said the agency doesn’t have the expertise to monitor for fraud and manipulation related to election contracts: “To be blunt, such contracts would put the C.F.T.C. in the role of an election cop,” he said in a May statement.

Another argument: These markets already exist. Polymarket, for example, saw more than $473 million of trading volume in June, according to the crypto data platform Dune Analytics.

“These markets are important, and they’re inevitable,” John Aristotle Phillips, the C.E.O. of PredictIt, a prediction market operated by academics, told DealBook. “It’s only a question right now of whether or not they’re going to be regulated in the United States or they’re going to be forced offshore where there’s no regulation.” — Sarah Kessler

IN CASE YOU MISSED IT

Federal prosecutors accused Google of again violating competition laws. Government lawyers opened the second antitrust case against the tech giant in 12 months, this time contending that the company used an acquisition to dominate the market for display ads on the web, lock out competitors and bolster its profits. Google is arguing that the feds are seeking to disrupt a system that helps out small businesses, and that the government is defining online advertising too narrowly.

Norfolk Southern fired its C.E.O. over an affair with another executive. The railroad operator dismissed Alan Shaw, its leader of two years, after its board hired a law firm to investigate him over potential ethical lapses. It discovered that he had a consensual relationship with the company’s chief legal officer, Nabanita Nag, who was also fired. Shaw’s ouster capped a troubled tenure that included a major derailment in East Palestine, Ohio, and an activist investor campaign.

Big banks watered down proposed capital regulations. American regulators unveiled a plan that would raise reserve requirements for the country’s biggest lenders by far less than originally envisioned; so-called midsize lenders would also escape heightened regulation. It was a victory for banking chiefs including Jamie Dimon of JPMorgan Chase, who strenuously argued that tougher rules would hurt the U.S. economy.

The Miami Dolphins may gain new investors. DealBook broke the news that Stephen Ross, the N.F.L. team’s owner, is in talks to sell a stake of as much as 15 percent to a group including the investment firm Arctos Partners and wealthy individuals. A deal, which could be approved by the league as soon as December, would be one of the first under new N.F.L. rules that allow certain private equity firms to buy minority stakes in the league’s franchises.

Elon Musk, X and politics

Donald Trump said last week that he would appoint Elon Musk to run a “government efficiency commission” if elected in November. He wants Musk to cut costs the way he did after he bought Twitter in 2022, one source close to the men told The Times.

Musk’s stunning $44 billion takeover of the company, which he renamed X, transformed a platform that aspired to be the internet’s public town square. X has also played a role in Musk’s support for Trump: The tech entrepreneur pitched the idea of an efficiency commission during a livestreamed conversation with Trump on the platform.

In their upcoming book, “Character Limit,” The Times’s Kate Conger and Ryan Mac tell the story of the acquisition and its fallout. DealBook talked with Kate and Ryan about their reporting. The interview has been condensed and edited.

Musk has gone from not saying much about politics to committing as much as $180 million to a Trump super PAC and hiring a Republican political adviser. Why is he becoming so much more involved?

Kate: You see these radicalizing moments for him, one of them being Covid shutdowns in California that forced him to close Tesla manufacturing facilities.

But I think he’s someone who has always been really resistant to the idea of just being a donor. He wants to have more hands-on control and involvement and hasn’t wanted to do what other tech folks have done, which is just hand a bunch of money over. He’s gotten more involved this political cycle. He wants to host candidates like Trump on X for conversations. He wants to have a role in the White House if Trump is to win the election.

If Trump wins, how would Musk try to influence policy?

Ryan: They talked about the government efficiency commission, but it remains to be seen — there are a lot of questions about conflict of interest. Remember, this is a guy who runs a company that takes in billions of dollars from the federal government for space operations, who runs a company that relies on government subsidies when it comes to electric vehicle adoption.

What do you think people misunderstand about this story?

Kate: When the deal started, the narrative really quickly flattened into “good guys at Twitter versus big, bad Elon.” But the history of the company is so much more complicated than that. And there are many, many things that went on prior to this transaction that put Twitter into a place where it could be acquired by someone like Musk.

The other thing people tend to get wrong is thinking Musk is playing three-dimensional chess. The knee-jerk and sort of ill-thought-through nature of his decision-making was really on display throughout this.

Ryan: He’s in the room launching Twitter Blue, the subscription service to buy badges, and he literally says the quote, “We’re going to be shooting from the hip in real time.”

But he’s also very successful in other venues. What is he doing right?

Ryan: He was a visionary when it came to electric vehicles and the privatization of space. But just because you’ve become very successful in those things doesn’t necessarily make you cut out to run a social media company or to run a government efficiency commission.

OpenAI is setting its sights high for its latest fund-raising round, seeking about $6.5 billion at a valuation of around $150 billion. The numbers are huge by any measure: The deal would make ChatGPT’s parent company one of the most valuable privately held start-ups in the world, and the round would be among the biggest raised in two decades.

Michael J. de la Merced contributed reporting.

Thanks for reading! We’ll see you Monday.

We’d like your feedback. Please email thoughts and suggestions to dealbook@nytimes.com.