The regulator asked the court to extend the pause of Kalshi’s political prediction markets for as long as the agency’s appeal is pending.
Warning of an imminent “explosion in election gambling,” the U.S. Commodity Futures Trading Commission asked an appeals court to extend the pause on Kalshi’s political prediction markets for as long as the agency’s appeal is pending.
“The district court’s order has been construed by Kalshi and others as open season for election gambling,” the CFTC said in a filing Saturday, referring to a judge’s Sept. 6 decision that the regulator shouldn’t have stopped the company from offering contracts on which party will control each house of Congress.
In the wake of that decision, the agency noted, Wall Street heavyweight Interactive Brokers announced it would offer contracts on the presidential election through a CFTC-regulated subsidiary.
Unless the U.S. Appeals Court for the District of Columbia extends the pause on Kalshi’s contracts for the appeal’s duration, other CFTC-regulated exchanges will follow suit, the agency said. “An explosion in election gambling on U.S. futures exchanges will harm the public interest.” The harms include market manipulation and “damage to electoral integrity,” the CFTC reiterated.
Industry repercussions
Separately, the CFTC has proposed to ban election contracts at all exchanges on its watch. Several legal experts said the district court’s opinion could torpedo that proposal.
Read more |U.S. Political Prediction Markets: Why Kalshi’s Court Victory Matters
The district court’s opinion also has potential ramifications for cryptocurrency businesses. The opinion relied on the Supreme Court’s Loper Bright ruling, which curtailed regulators’ power to interpret their statutory authority, shifting such power to the courts.
“It’s likely that federal agencies will continue to see their authority curtailed as a result of the Lopper Bright ruling and in the absence of new, clearer legislation from Congress,” wrote Alex Thorn, head of firmwide research at crypto investment bank Galaxy Digital, in a research note Friday. “This could have wide implications for the crypto industry.”
A long-running fight
Kalshi filed to list election markets last year. The CFTC blocked it. The company sued and won last week. The CFTC filed for an emergency stay blocking Kalshi from immediately listing its contracts, but lost that fight too. The contracts went live Thursday, before being temporarily suspended by the D.C. Appeals Court while it considers the emergency stay.
Such a stay would cause “irreparable harm” to Kalshi, the company contended in a Friday filing.
