The midterms will be traded, whether Wisconsin likes it or not.

The warning, and the response

The Wisconsin Elections Commission warned last week that voters cannot legally cast a ballot in an election they bet on, citing state law that disqualifies people from voting in an election where they have placed a “bet or wager” — language the commission said it believes encompasses events-based contracts. “There’s likely a nonzero chance that courts will decide Kalshi and Polymarket are betting platforms,” said Don Millis, the Republican chair of the commission. “Our statements on this are designed to inform voters and raise awareness that if you bet on an election and vote in that contest, you could compromise your ability to vote.” The commission also noted it isn’t able to police bets on prediction-market platforms, and it is unclear whether voters would face any consequences.

Kalshi, the country’s biggest prediction-market operator by trading volume, shot back and accused the commission of “active voter suppression” — noting that it has hundreds of thousands of users in the state. The next day the company announced the launch of a midterm elections hub that it said would show real-time election forecasts based on how its users are betting. On Kalshi, users can bet on markets tied to Wisconsin elections, including who will win the governor’s race or become attorney general. Rick Heaslip, Kalshi’s general counsel, said the company is having internal discussions about how to react if other states follow Wisconsin’s lead: “Wisconsin is essentially threatening to prosecute or disenfranchise its own citizens for legal conduct.”

This is not a Wisconsin problem

Other states have language in their laws similar to Wisconsin’s, suggesting the issue could spread. Delaware, Texas and New Jersey are among the states where election betting is illegal, according to the Pew Research Center. In New York, voters can have their right to vote challenged at polling stations if they are suspected of having been paid for their vote or of betting on the result of an election, and they can be required to take a “Bribery Oath” swearing they haven’t become involved in “any bet or wager depending upon the result of this election.”

Kalshi and Polymarket dispute the gambling characterization, saying they offer event contracts regulated by the Commodity Futures Trading Commission. The CFTC, run by Trump appointee Michael Selig, has sued states on behalf of prediction-market platforms. The multistate legal battle is likely to end up at the Supreme Court. A Polymarket spokesman said Wisconsin’s statement “runs counter to the CFTC’s established framework for regulating prediction markets.”

With control of both the U.S. Senate and House in play, the midterm elections are set to be the first in which prediction markets play a starring role. Operators say they channel the wisdom of crowds; the markets came to prominence after correctly forecasting the 2024 presidential result while traditional poll-based models called the race a tossup. Critics fear interested parties could place large bets to create the impression a candidate is leading and sway voters, and insider trading has become a concern after high-profile cases of people profiting off knowledge of government information. “A very strong argument can be made that people ought to be voting based on who is the best candidate for the position, and not on how much money they will make,” said Ann Jacobs, a Democratic appointee on the Wisconsin commission.

Meanwhile, the brokerages are still building

The legal war has not slowed the commercial one. Robinhood (HOOD) is in talks with the digital-currency exchange Crypto.com to expand the brokerage’s foothold in prediction markets, according to people familiar with the matter. Robinhood has so far relied on Kalshi to supply betting contracts, but what began as a partnership is evolving into direct competition as the two companies push onto each other’s turf. The partnership under discussion would add Crypto.com’s prediction-market business to Robinhood’s hub and let users place yes-or-no bets offered by the crypto exchange on Robinhood’s platform. There are no guarantees the two will reach a deal; a Robinhood spokesperson said the company “will continue to partner with multiple exchanges to ensure our customers have access to a diverse and resilient marketplace.”

This summer Robinhood launched Rothera, a futures and derivatives exchange, with market maker Susquehanna International Group, to expand its prediction-markets offerings; since then, Robinhood’s customers have accounted for a decreasing portion of Kalshi’s trading volumes, analysts say. Kalshi has led the surge, seeing $27 billion in volumes for World Cup related markets compared with around $1 billion for markets tied to the 2024 presidential election. Kalshi CEO Tarek Mansour told the Journal in June that the company planned to expand beyond events-based contracts, and said he considers Robinhood a top competitor: “They’re a partner of ours at the same time they’re competing with us, and I think that’s also great.”

What the crowd is actually pricing

Strip out the litigation and there is a number worth carrying. The prediction markets currently price the S&P 500 at 64% to be 2026’s best performer, ahead of gold at 20% and bitcoin at 16%. After a week that included a war, an oil round trip and a rough tape, the money still says the index beats the shiny alternatives. So does our allocation.

The June companion pages are the place to start if you have not read them: the fake-liquidity problem inside these markets and what it meant when a mainstream brokerage put event contracts on the platform. Sean’s full opinion — including what he will and will not use these markets for — runs in this week’s Letters at The Crowd Bought a Seat at the Election (Part II).