The Commodity Futures Trading Commission (CFTC) is responding to a court ruling regarding the authorization of contracts on political events.
According to documents filed in the U.S. District Court for the District of Columbia, exchange firm and prediction market Kalshi has been authorized to offer its congressional markets ahead of November’s presidential election. Kalshi received the ruling after the CFTC blocked the company from listing its political markets in 2023. State gaming laws across the country prohibit regulated wagering on all political events.
As a result of the CFTC’s blockage, Kalshi sued the regulator in 2023 arguing that the CFTC didn’t have the proper authority to ban the company from offering political contracts.
Political wagering in America may soon be a reality but the CFTC may make a last-ditch effort to appeal the court’s decision to allow Kalshi to offer contracts on political events.
In response to Judge Jia Cobb’s ruling, the CFTC has filed an emergency motion for a two-week stay on the decision while they consider an appeal. If granted, the stay would last until Sept. 22.
“The CFTC is entitled to a stay pending issuance of the memorandum opinion because serious legal questions are involved, and a temporary stay presents ‘little if any harm,’” said the regulator in a court filing.
The CFTC is asking the district court to reconsider its decision as Cobb has yet to detail the reasoning for her ruling but the judge plans to file a memorandum with an explanation.
The regulator believes that other companies may quickly follow in the footsteps of Kalshi.
“The Commission anticipates that other DCMs [designated contract market], in addition to plaintiff, may seek to self-certify election contracts that are similar to plaintiff’s. These contracts also could be listed for trading one business day after the DCM’s filing of its self-certified submission with the Commission, and the CFTC would have very limited recourse in this event,” added the regulator.
CFTC rules make a big impact
Cobb’s favorable ruling for Kalshi comes after the CFTC reevaluated its rules in May.
That month, the CFTC voted 3-2 in favor of continuing its ban on event contracts used to wager on politics, award shows, and other popular events over integrity concerns.
“Contracts involving political events ultimately commoditize and degrade the integrity of the uniquely American experience of participating in the democratic electoral process,” said CFTC Chair Rostin Behnam in May. “Allowing these contracts would push the CFTC, a financial market regulator, into a position far beyond its Congressional mandate.”
Kalshi isn’t the only entity dealing with the repercussions of the CFTC’s view on contracts.
Earlier this year, U.S. District Judge David Alan Ezra decided to transfer a lawsuit that accuses the CFTC of acting “arbitrarily and capriciously” amid an attempt to shutter the operations of New Zealand-based PredictIt, which offers online political betting.
PredictIt brought on the lawsuit after the CFTC withdrew a no-action letter in 2022 that allowed the platform to operate in the U.S. under certain conditions. The conditions included PredictIt not operating for a profit. In response, PredictIt sued the CFTC.
The lawsuit was initially dismissed for an injunction but was overturned by an appeals court. The case has been moved to the D.C. District Court due to logjams in other courts.
