Update Sept. 12 at 8:46 pm UTC: This article has been updated to include a statement from CFTC Commissioner Caroline Pham.
A federal judge has granted partial summary judgment in Kalshi’s case against the United States Commodity Futures Trading Commission, paving the way for the prediction market to list bets related to elections.
In a Sept. 12 opinion filed in the US District Court for the District of Columbia, Judge Jia Cobb said that the CFTC “exceeded its statutory authority” by issuing an order halting Kalshi’s election markets. The commission argued that gambling on the US political races could disrupt markets and potentially threaten election integrity.
“Kalshi’s contracts do not involve unlawful activity or gaming,” said Judge Cobb. “They involve elections, which are neither. Although the Court acknowledges the CFTC’s concern that allowing the public to trade on the outcome of elections threatens the public interest, this Court has no occasion to consider that argument.”
Elections aren’t “gaming?”
The judge’s opinion suggested that Congress must issue an order authorizing the CFTC to block Kalshi’s activities. Under federal or state law, Judge Cobb said, Kalshi’s elections contracts “do not involve activity that is unlawful” or constitute “gaming.”
“Kalshi’s event contracts ask buyers to take a yes/no position on whether a chamber of Congress will be controlled by a specific party in a given term. That question involves [...] elections, politics, Congress, and party control; but nothing that any Party to this litigation has identified as illegal or unlawful activity.”
Source: Kalshi
It’s unclear if the decision will immediately result in Kalshi offering users the ability to take positions and trade on US congressional elections. There are 54 days until US Election Day, with early voting in Pennsylvania expected to begin on Sept. 16.
“The Court’s opinion in Kalshi echoes the concerns I raised more than two years ago when the CFTC first embarked on a creative reading of its own rules and governing statutes in this matter,” said CFTC Commissioner Caroline Pham.
“Oftentimes, the simplest explanation for what a law means is the correct one. The Commission would do well to learn from this experience and respect the limitations of its authority.”
Related: US prediction market Kalshi to take bets on Bitcoin and Ether
Judge Cobb initially issued a decision on Sept. 6 that would have allowed Kalshi to move forward with listing election bets. However, on Sept. 9, she stayed that order in response to an emergency motion from the CFTC. The case has been in limbo since that filing.
Crypto prediction platform Polymarket lists many contracts based on whether US Democratic presidential nominee Kamala Harris or Republican Donald Trump will carry individual states in the Electoral College or win the election outright in November. At the time of publication, the platform and national polls showed the candidates in a virtual dead heat.
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