CFTC Challenges Kalshi's Election Contracts Ruling

According to CoinDesk, attorneys for the U.S. Commodity Futures Trading Commission (CFTC) argued in a brief to an appellate court on Wednesday that a federal judge made an error in allowing prediction market operator Kalshi to list and trade election contracts. This brief reiterates many of the arguments previously made before the lower court. The district court judge overseeing Kalshi's lawsuit against the CFTC allegedly ignored the definitions of terms under the Commodity Exchange Act and unjustifiably barred the agency from examining transactions involving gaming, according to the filing. Last month, the judge ruled that the CFTC could not prevent Kalshi from listing election contracts. The regulator then filed for a stay with the appeals court to prevent the company from launching the product pending the appeal's outcome. However, the appeals court judges ruled that the CFTC had not demonstrated there would be irrevocable harm. As a result, Kalshi has listed several event contracts tied to the 2024 election, including the presidential contest winner and various state outcomes. Wednesday's filing delved into definitions, arguing that the CFTC did not use an expansive definition of gaming in its rejection of Kalshi's application to launch election markets. The CFTC pointed to the new contracts in its filing, making a similar argument to its previous filing when it sought an emergency stay of the district court's order. The filing stated that Kalshi has taken the decision as carte blanche to list dozens of election betting contracts, including bets on the presidential election outcome, the popular vote winner, victory margins, and numerous other state and federal elections. Kalshi’s website also previews other contracts, including what it refers to as 'parlays' on various election outcomes, as 'coming soon.' Kalshi, one of two U.S.-regulated prediction markets that settle trades in dollars (the other being Interactive Brokers' ForecastEx), had to sit out most of the 2024 election betting boom while its case was pending. The crypto-based, offshore platform Polymarket currently dominates the field.