Coinspeaker
CFTC Appeals Kalshi Ruling, Seeks Ban on Election Betting Contracts
On Thursday, September 19, 2024, the Commodity Futures Trading Commission (CFTC) intensified its legal battle with the prediction market platform Kalshi. The agency asked the US Court of Appeals for the District of Columbia to halt election betting on the platform. Previously, a district court sided with Kalshi, permitting the company to offer contracts tied to U.S. elections.
Now, the case moves to the appeals court, with Judges Patricia Millett, Cornelia Pillard, and Florence Pan hearing both sides. The CFTC remains firm, voicing ongoing worries about the possible risks election betting could pose to the integrity of US elections.
“I just don’t think that Congress or the general public wants a financial federal regulator policing elections.”
This legal dispute between Kalshi and the CFTC raises broader questions about prediction markets in politics. Without clear congressional guidelines, such conflicts are likely to persist. The future of election betting depends on the upcoming court decision, which could reshape how financial regulators handle emerging markets.
As both sides await the ruling, it’s evident that this case has significant implications for the intersection of finance, regulation, and democracy. Experts have urged Congress to establish clearer guidelines to prevent future clashes between new markets and traditional regulatory frameworks. With the next US elections approaching, the stakes remain high as the legal battle continues.
“I just don’t think that Congress or the general public wants a financial federal regulator policing elections.”
This legal dispute between Kalshi and the CFTC raises broader questions about prediction markets in politics. Without clear congressional guidelines, such conflicts are likely to persist. The future of election betting depends on the upcoming court decision, which could reshape how financial regulators handle emerging markets.
As both sides await the ruling, it’s evident that this case has significant implications for the intersection of finance, regulation, and democracy. Experts have urged Congress to establish clearer guidelines to prevent future clashes between new markets and traditional regulatory frameworks. With the next US elections approaching, the stakes remain high as the legal battle continues.
“We’re trying to figure what’s in and what’s out,” the judge said.
Kalshi’s attorneys responded, arguing that betting on elections is comparable to sports betting, and emphasized their strict identity verification policies to maintain fairness.
The judges also questioned whether betting on elections fundamentally differs from other financial hedging practices, like those used in farming or weather futures. This distinction remains pivotal as the court considers the broader legal and societal implications of opening election outcomes to prediction markets.
Election Betting Fate Awaits RulingKalshi’s recent victory in district court is a notable achievement, yet the future of election betting remains unclear. Lawyers from WilmerHale, representing Kalshi, expect the appeals court to act quickly, especially with the US elections approaching. Both parties have submitted their arguments, and a prompt ruling is anticipated.
Meanwhile, regulatory efforts continue to evolve. In May 2024, the CFTC proposed banning event contracts on sensitive issues such as gaming, terrorism, and assassination. Chair Behnam emphasized the risks of the CFTC overseeing election-related contracts, remarking:
“I just don’t think that Congress or the general public wants a financial federal regulator policing elections.”
This legal dispute between Kalshi and the CFTC raises broader questions about prediction markets in politics. Without clear congressional guidelines, such conflicts are likely to persist. The future of election betting depends on the upcoming court decision, which could reshape how financial regulators handle emerging markets.
As both sides await the ruling, it’s evident that this case has significant implications for the intersection of finance, regulation, and democracy. Experts have urged Congress to establish clearer guidelines to prevent future clashes between new markets and traditional regulatory frameworks. With the next US elections approaching, the stakes remain high as the legal battle continues.
“These are important issues and the district court issued a seriously flawed decision that if it goes into effect, lets Kalshi immediately open its futures exchange to high stakes betting on the congressional elections in November,” said Rob Schwartz, general counsel at the CFTC.
Election Betting and Its ControversyThe conflict began in 2023 when the CFTC opposed Kalshi’s effort to offer futures contracts on congressional election outcomes. Last week, US District Judge Jia M. Cobb ruled that the CFTC had overstepped its legal boundaries by denying Kalshi’s contracts. In response, the agency filed an emergency motion to halt the ruling.
Central to the CFTC’s argument is its concern that allowing betting on political events could erode public confidence in US elections. Rob Schwartz, the CFTC’s general counsel, warned that such betting poses a threat to election integrity.
Event markets like Kalshi, which allow betting on future outcomes, have drawn increasing scrutiny. Users can bet on everything from elections to sports results. CFTC Chair Rostin Behnam has noted a sharp rise in event contracts since 2021, pointing out the unprecedented regulatory challenges they create.
During the hearing, the debate centered on how the CFTC differentiates election betting from other types of gambling, like sports or entertainment wagers. The judges pressed Schwartz on how elections fit the definition of a “contest of others.”
“We’re trying to figure what’s in and what’s out,” the judge said.
Kalshi’s attorneys responded, arguing that betting on elections is comparable to sports betting, and emphasized their strict identity verification policies to maintain fairness.
The judges also questioned whether betting on elections fundamentally differs from other financial hedging practices, like those used in farming or weather futures. This distinction remains pivotal as the court considers the broader legal and societal implications of opening election outcomes to prediction markets.
Election Betting Fate Awaits RulingKalshi’s recent victory in district court is a notable achievement, yet the future of election betting remains unclear. Lawyers from WilmerHale, representing Kalshi, expect the appeals court to act quickly, especially with the US elections approaching. Both parties have submitted their arguments, and a prompt ruling is anticipated.
Meanwhile, regulatory efforts continue to evolve. In May 2024, the CFTC proposed banning event contracts on sensitive issues such as gaming, terrorism, and assassination. Chair Behnam emphasized the risks of the CFTC overseeing election-related contracts, remarking:
“I just don’t think that Congress or the general public wants a financial federal regulator policing elections.”
This legal dispute between Kalshi and the CFTC raises broader questions about prediction markets in politics. Without clear congressional guidelines, such conflicts are likely to persist. The future of election betting depends on the upcoming court decision, which could reshape how financial regulators handle emerging markets.
As both sides await the ruling, it’s evident that this case has significant implications for the intersection of finance, regulation, and democracy. Experts have urged Congress to establish clearer guidelines to prevent future clashes between new markets and traditional regulatory frameworks. With the next US elections approaching, the stakes remain high as the legal battle continues.
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