US Appeals Court holds oral arguments regarding Kalshi election betting

Oral Argument Kalshi CFTC Political Event Contracts Wagering Gambling
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Kalshi is continuing to address concerns from the Commodity Futures Trading Commission (CFTC) regarding its contracts on political events.

On Friday, the U.S. Court of Appeals for the District of Columbia Circuit held an oral argument with Kalshi and the CFTC regarding the legality of political event contracts, how they should be defined and how they should be regulated amid their growing popularity.

“The reason we’re here today is because a federally regulated exchange has turned itself into an online casino for betting on elections,” said CFTC General Counsel Rob Schwartz during Friday’s oral argument. “The question for the court is not whether that’s right or wrong but whether the CFTC can even evaluate the activity.”

Regulatory oversight by the CFTC

Friday’s oral argument adds to a contentious legal battle between Kalshi and the CFTC.

In 2023, the CFTC blocked Kalshi from listing its political markets due to state gaming laws nationwide prohibiting wagering on political events. As a result of the blockage, Kalshi sued the CFTC arguing that the commission didn’t have the proper authority to ban its contracts.

A year later, the District Court for the D.C. Circuit allowed Kalshi to offer its contracts.

Last October, the U.S. Court of Appeals for the D.C. Circuit upheld the district court’s ruling allowing Kalshi to offer its contracts ahead of the 2024 presidential election. The appeals court upheld the ruling after the CFTC filed an emergency motion for a two-week stay.

In its motion, the CFTC argued that Kalshi’s political contracts were tied to gambling harm, allowing for a ban. It also claimed that Kalshi’s contracts can lead to market manipulation.

Despite the CFTC’s arguments and attempted ban, Kalshi reported strong interest in its contracts during last year’s presidential election. Between October 2024 and November 2024, Kalshi accepted more than $250 million in contracts on the presidential election.

Kalshi and fintech giant Robinhood combined for over $300 million in election contracts.

Comparing political contracts to sporting events

The oral argument between the CFTC and Kalshi discussed whether political contracts can be defined as a form of entertainment or a type of contest that can foster event contracts.

“If we agree that betting on sporting events is covered, why aren’t we betting on the ESPN ESPY Awards, the Grammys or TIME’s Person of the Year?,” continued Schwartz. “Our position is that Congress didn’t intend for us to make that judgment essentially overnight.”

Currently, exchanges are allowed to add these markets overnight without the express approval of the CFTC. The CFTC maintains it has the jurisdiction to weigh in on these markets rather than let them be mounted without pushback.

Kalshi also discussed its position as a nationwide provider of political event contracts. The prediction markets platform shared its perception of its contracts in relation to gaming.

“Our point is that an event contract involves staking money on a contingency. If that’s the definition of an event contract, we can’t possibly read gaming to mean gambling in its broadest sense because that would then fully overlap with the definition of an event contract,” said Kalshi legal counsel Jacob M. Roth during the oral argument.

The CFTC and Kalshi will continue their legal proceedings regarding event contracts as Kalshi receives support from exchanges, including ForecastEx. According to court documents, ForecastEx agrees with the district court’s ruling to allow political event contracts. The exchange also supports Kalshi’s analysis regarding the contracts.

Kalshi’s new strategic advisor

Earlier this week, Kalshi named Donald Trump Jr.,President-elect Donald Trump’s eldest son, a strategic advisor after showcasing interest in the company during the election.

CEO Tarek Mansour told CNBC that the hiring of Trump Jr. was not politically charged.