The US elections are here and it is now legal to bet on them. Last month, the courts allowed Americans to buy event contracts, which is just a fancy way of saying “bet on the outcome of the congressional election.” Given the polarized political climate and election integrity issues we already face, allowing Americans to legally bet on the outcome of elections poses many problems.

On October 2, the U.S. Court of Appeals denied an emergency request from the Commodities Future Trading Commission seeking a stay to prevent election event trading. The commission appealed the initial ruling last month allowing a fintech startup, Kalshi, to sell such contracts and asked the courts to suspend the market until the appeal is heard.

Kalshi proposes “congressional oversight contracts” that allow U.S. citizens to place an unlimited amount of money on the outcome of elections. These contracts specify which party will control the House of Representatives or the Senate. Kalshi now also offers event contracts on the outcome of the presidential election.

The CFTC had initially barred Kalshi, which is regulated by the commission, from offering contracts for election-related events, with the commission arguing that such contracts amounted to election gambling or gambling, which is illegal in many states. Kalshi approached the courts to argue that the decision was arbitrary, capricious and against the law. The district court agreed and entered summary judgment in favor of Kalshi on September 6, finding that elections are not games and therefore games of chance do not apply to election contracts.

Once the courts legalized betting on elections, another brokerage firm, Interactive Brokers, immediately announced that it would offer similar products. On October 28, Robinhood followed suit. This is significant because Interactive Brokers and Robinhood are both significantly larger and better known than Kalshi. Interactive Brokers has more than 3 million brokerage accounts, while Robinhood has nearly 11 million, reaching a much larger number of customers. Other brokerages will certainly follow suit.

There are many sources for betting on the US elections, such as Bovada, an offshore gaming platform, or Polymarket, a crypto-based world events betting platform that has raised almost $3 billion from only American presidential election. But Kalshi, Interactive Brokers and the other traditional financial institutions that will likely follow are bringing these bets to the general public.

The danger in all of this is the possibility of using these betting markets to distort an election. Election event contracts do not serve the typical purpose of derivatives and the futures market. These markets were developed primarily as hedging techniques to offset the risks associated with these commodity products. The CFTC argued, unsuccessfully, that it had neither the resources nor the experience to play the role of “election cop.” But you only need to remember the movie “Trading Places” to understand what a useful role frozen orange juice futures play in our economy. What useful financial role do these political event contracts play?

The easy answer is probably none. The simplest answer is that it becomes another way to attack the credibility of our electoral process.

As if the stakes in the US elections were not already high enough, some may now attempt to manipulate the elections for possible financial gains. Instead of providing “real-time” polling data with indicative amounts showing who is favored to win the election, this type of information may cause voters to stay home and not exercise their right to vote the same way people might not watch the vote. end of a match when one team wins with an unbalanced score.

Given that Kalshi alone will allow bets of up to $100 million, such bets could become not only huge unexpected wins, but also self-fulfilling prophecies. With current congressional oversight contracts, for example, if the “lines” indicate that the amounts bet on one political party are significantly higher than on another, this information can not only affect possible voter turnout, but also influence the election results.

While sports betting has become a booming business since becoming legal in 38 states and the District of Columbia, it appears legal political betting isn’t far behind.

Melinda Roth is a visiting associate professor at George Washington University Law School.