TLDR
- Kalshi launched political prediction markets after winning a court case against CFTC
- CFTC appealed the decision, seeking to halt the markets
- Judge ruled CFTC exceeded authority in banning political prediction markets
- Kalshi’s new contracts on House and Senate control traded briefly before being paused
- CFTC argues public interest may be harmed if contracts continue trading
The new contracts allowed users to bet on which party would control the House of Representatives and Senate after the upcoming elections.
However, the celebration was short-lived as the CFTC quickly filed an emergency appeal to halt trading on these markets.
The legal battle between Kalshi and the CFTC has been ongoing since November 2023, when Kalshi sued the regulator for preventing it from offering contracts based on U.S. election outcomes.
On Thursday morning, U.S. District Judge Jia Cobb ruled in favor of Kalshi, stating that the CFTC had exceeded its authority in banning political prediction markets.
The first election market is live on @Kalshi.
Today marks the first trade on regulated election markets in nearly a century.
This one is for you, the prediction markets community. pic.twitter.com/USzzVMffQn
— Tarek Mansour (@mansourtarek_) September 12, 2024
In her ruling, Judge Cobb criticized the CFTC’s efforts to conduct a public interest review of Kalshi’s plans, arguing that the regulator was overstepping its bounds.
“Kalshi’s contracts do not involve unlawful activity or gaming. They involve elections, which are neither,” Judge Cobb wrote in her memorandum opinion.
Following the court decision, Kalshi wasted no time in launching its political prediction markets. However, the CFTC swiftly filed an emergency motion with the appeals court, seeking to stay the markets while it considers whether to appeal the full ruling.
The CFTC argued that Kalshi had “raced to launch its election gambling contracts” before the Commission had the opportunity to file its motion for a stay. The regulator expressed concerns about “serious legal issues and public interests at stake.”
In response to the CFTC’s emergency motion, the appeals court ordered Kalshi to halt its contracts while it considers the motion. Trading on Kalshi’s two new contracts was paused as of 11:30 p.m. ET Thursday, with a notice on the company’s website citing a “pending court process.”
and… WE'RE LIVE!!!
Thank you to everyone for the prayers and good energy all these years, now let's do this 💪🏻💪🏻💪🏻 https://t.co/sjVjsXvODv
— Luana Lopes Lara (@luanalopeslara) September 12, 2024
Kalshi’s attorneys pushed back against the CFTC’s motion, stating that “no administrative stay is necessary or appropriate.” They argued that Judge Cobb’s decision was correct, as the statute only empowers the CFTC to block event contracts involving gaming or unlawful activity.
The appeals court has set a tight timeline for both parties to present their arguments. Kalshi must file a response by Friday evening, and the CFTC can file a reply by Saturday evening.
The CFTC has long opposed political prediction markets, citing concerns about potential fraud and the integrity of elections. The regulator is currently in the middle of a rulemaking process to ban political prediction markets in general from the U.S.
