A judicial authorities' decision enables the prediction market Kalshi to provide wagering opportunities on forthcoming American elections.
The platform Kalshi introduced congressional power control agreements mid-afternoon Thursday, allowing U.S. citizens to stake bets on which party will govern the House and Senate in 2025. The Commodity Futures Trading Commission, claiming such bets were illegal and could corrupt elections, disputed the judge's decision to allow Kalshi's contracts shortly after it was announced.
Federal Judge Jia Cobb in Washington D.C., supported Kalshi in their conflict with the CFTC last week and published her judgment on Thursday, arguing the agency overstepped its authority in blocking Kalshi from offering these contracts last year.
Cobb stated in her judgment, "Kalshi's contracts aren't related to illicit activities or gaming. They involve elections, which aren't included." She also refused the government's request during Thursday's hearing to halt Kalshi from offering contracts until its appeal is resolved.
Kalshi had warned that implementing Cobb's ruling would have a severe impact, labeling the government's request as a "ploy to run out the clock" and "win in practice despite losing in court," in documents submitted earlier this week. The firm also highlighted the growing popularity of Polymarket, an offshore, unregulated cryptocurrency-based prediction market, since the CNN debate in June.
The legal dispute between Kalshi and the CFTC, which began in 2023, saw Kalshi assert that the agreements serve the public interest by offering accurate election data prediction and allowing hedging of different outcomes. The CFTC argued that these agreements constitute illegal gambling and that it lacks the resources to oversee them. Its chairman, Rostin Behnam, has also expressed concerns that election agreements would "eventually undermine and undermine the electoral process's integrity."
Kalshi co-founder Luana Lopes Lara celebrated the decision on Thursday, announcing on X, "WE'RE LIVE." The CFTC chose not to comment.
The agency initiated a broader crackdown on event-based betting earlier this year, proposing regulations that would explicitly outlaw contracts related to election outcomes, award ceremonies, and sports, among other things.
Behnam, citing a "substantial boost in the variety of event contracts being marked for trading on CFTC-registered exchanges," stated in a May declaration that the CFTC's involvement in such contracts "would lead the CFTC, a financial market regulator, beyond its congressional authority and competence."
"To put it bluntly, such contracts would place the CFTC in the role of an election enforcer," he added.
Kalshi's victory in this legal battle could potentially attract more businesses that offer similar prediction markets, seeing the opportunity to operate legally and avoid regulatory scrutiny. The CFTC's ongoing stance against event-based betting might drive such businesses to set up shop in jurisdictions less strict with these types of agreements.
