CFTC Faces Legal Challenge Over Election Betting Regulations

According to CoinDesk, the U.S. Commodity Futures Trading Commission (CFTC) is embroiled in a legal dispute with prediction market operator Kalshi over the regulation of election betting. Kalshi contends that only Congress has the authority to ban election betting, not the CFTC. This argument was presented in a recent court filing as part of an ongoing legal battle. Last September, the CFTC attempted to prevent Kalshi from listing event contracts that allowed traders to bet on political party control of the House or Senate following the November elections. The regulator claimed these contracts constituted "gaming" and were "unlawful under state law," deeming them "contrary to the public interest." Kalshi responded by suing the CFTC in the District of Columbia, arguing that the agency overstepped its statutory authority and violated the Administrative Procedure Act (APA) by attempting to ban election prediction markets. In its latest filing, Kalshi criticized the CFTC's interpretation of "gaming," describing it as arbitrary and lacking statutory basis. The District Court sided with Kalshi, with Judge Jia Cobb granting summary judgment in favor of Kalshi and rejecting the CFTC's broad interpretation of the Commodity Exchange Act (CEA). Cobb's decision vacated the CFTC's order blocking Kalshi's contracts. Following Cobb's ruling, the CFTC sought a stay of the order while it appealed, but Cobb declined. The regulator then approached a U.S. federal appeals court to temporarily block the election-related contracts, but the court unanimously denied the CFTC's emergency motion, citing a lack of concrete evidence that election contracts could harm the public interest. The CFTC is now officially appealing Cobb's ruling, aiming to expand the definition of gaming to include "political contests," which would effectively ban election betting if successful. In its brief filed on Friday, Kalshi reiterated its arguments from the lower court, urging the appellate court to uphold Cobb's ruling. Kalshi's lawyers argued that the CFTC's decision to prohibit its contracts exceeded its statutory authority, emphasizing that Congress has not authorized the CFTC to ban election prediction markets. The CFTC's response to Kalshi's brief is expected by December 6.