CFTC loses appeal as US court greenlights election-related prediction markets in Kalshi case

The United States Court of Appeals for the District of Columbia Circuit ruled that prediction markets that allow betting on U.S. elections are legal.

The decision came in an Oct. 2 ruling that rejected an appeal by the U.S. Commodity Futures Trading Commission (CFTC) that asked the court to grant an administrative stay in an earlier ruling against the regulator in its case against the Prediction market Kalshi to adopt.

The court found that the CFTC had failed to demonstrate that the public would suffer irreparable harm as a result of offering choice-based contracts in the United States.

Tarek Mansour, founder of US-based prediction market Kalshi, shared on X:

“US presidential election markets are legal. Officially. Finally. Kalshi prevails.”

This means Kalshi can now offer contracts related to US elections again. Nevertheless, a new application for a stay can be renewed if “substantial evidence exists,” the district court judges emphasized.

The CFTC banned Kalshi from offering politically-related contracts on its platform on September 22, 2023, after the prediction market urged the regulator to list a contract based on which party would control the US Congress that year.

Therefore, the prediction market sued the CFTC, arguing that the regulator’s ban was beyond its jurisdiction. Judge Cobb then sided with Kalshi, resulting in a motion for a stay.

A potential win for crypto platforms

US lawmakers called for CFTC action against US election prediction markets in a letter to Chairman Rostin Behnam dated August 5th.

The eight lawmakers who signed the document included Senators Elizabeth Warren (D-MA), Chris Van Hollen (D-MD), and Sheldon Whitehouse (D-RI), as well as Representatives Eleanor Holmes Norton (D-DC) and Jamie Raskin (D-MD).

The document claimed that Elections is not a for-profit enterprise and that enforcement action against the platforms offering these contracts would “restore confidence” in Elections.

On the other hand, Congressman Richie Torres also sent a letter to CFTC Chairman Behnam calling for the regulation of election-related prediction markets instead of the ban proposed by lawmakers in August.

Kalshi’s recent legal victory could benefit crypto-native prediction markets like BET and Polymarket if the CFTC decides to comply with the enforcement request.

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