In a significant legal battle, Kalshi, a betting market platform, is embroiled in a lawsuit against the United States Commodities Futures Trading Commission (CFTC) over the regulation of political betting, particularly election odds. According to the CFTC’s recent filing in a Washington, DC appeals court on October 16, the district court judge made critical errors when ruling in favor of Kalshi by allowing it to list and trade election-based odds. The CFTC argues that the court misinterpreted the Commodity Exchange Act (CEA) and undermined the agency’s regulatory powers. Specifically, they contend that the court overlooked essential definitions of “gaming” and “event-focused” contracts in its judgment, which allegedly mischaracterized the risks associated with political betting.
The litigation began when Kalshi sued the CFTC in November 2023 after receiving an order that barred it from offering political event contracts. In a landmark decision in September, a federal court ruled that the CFTC could not prevent Kalshi from listing these contracts, a significant win for the platform. However, the CFTC quickly responded by appealing this ruling and requested an emergency stay to halt Kalshi’s activities until the appeal process was complete. The appeals court declined this request on October 2, allowing Kalshi to continue with its political bets, including wagers on the presidential election, popular vote outcomes, and state margin victories.
Following this ruling, Kalshi wasted no time in launching various election betting contracts, highlighting its readiness to take advantage of the legal green light provided by the court. Highlighting the competitive nature of the betting market, Kalshi’s listings began to compete with other platforms like Polymarket, which had already seen extensive betting volumes during the legal proceedings. The CFTC, however, maintains that Kalshi’s election odds contracts mirror gambling products and must be restricted under U.S. law.
In an Oct. 11 filing, the presiding judge indicated a willingness to expedite the proceedings surrounding the CFTC’s appeal, although formal submission from the CFTC isn’t due until December 6—just a month after the impending elections. The expedited timeline suggests an urgency on the part of the CFTC to address the potential implications of political betting amidst an election cycle, while also revealing Kalshi’s advantage in preparing their market offerings during this critical period.
The resolution of this case holds major ramifications for the future of political betting in the United States. If the appeals court sides with Kalshi, it could set a precedent for other platforms wishing to engage in political betting, potentially transforming the landscape of the gambling market. Conversely, a ruling in favor of the CFTC could lead to stricter regulations surrounding event-based contracts, reshaping how betting platforms operate within this niche.
Amid the ongoing legal challenges, Kalshi has found itself mired in a regulatory contest with the CFTC while other betting markets continue to prosper. As Kalshi awaits a final decision, the result of this case will carry significant consequences not just for the platform but also for the future trajectory of political betting in the United States, which remains a contentious and evolving aspect of the broader gambling landscape.