A federal appeals court in Washington, DC, on Thursday evening temporarily blocked a prediction market from offering bets on the November elections, granting a government watchdog’s request to pause a ruling that made way for legal political gambling in the United States.
Earlier Thursday, US District Judge Jia Cobb in Washington rejected an effort from the Commodity Futures Trading Commission to delay the platform, Kalshi, from congressional control contracts, which would allow Americans to place bets on which party will be in control of the House and Senate in 2025. The CFTC, which argued that such wagers were illegal and could harm the integrity of elections, swiftly appealed the judge’s decision to the DC Circuit Court of Appeals.
Kalshi quickly launched the contracts hours before the appellate ruling.
The appeals court ordered Kalshi to respond to the CFTC’s motion by Friday evening, and the agency has the option to respond by Saturday evening.
Cobb sided with Kalshi in its dispute with the CFTC last week but formally released her opinion Thursday, saying the agency exceeded its statutory authority when it blocked Kalshi from offering the contracts last year.
“Kalshi’s contracts do not involve unlawful activity or gaming. They involve elections, which are neither,” Cobb wrote in her opinion. She also denied a request by the government during Thursday’s hearing to block Kalshi from offering contracts pending its appeal.
Kalshi had warned that pausing Cobb’s ruling would be “devastating,” dismissing the agency’s request as “an attempt to run out the clock” and “win in practice even after losing in court,” in filings earlier this week. The company also pointed to the rise of Polymarket, an offshore, unregulated crypto-based prediction market that has risen in popularity following the CNN debate in June.
Since the monthslong legal dispute between Kalshi and the CFTC began in 2023, the New York-based startup has insisted the contracts are in the public interest because they could provide accurate data for election forecasting and allow people to hedge their bets on different outcomes. The CFTC has argued that the contracts count as illegal gambling and that it doesn’t have the resources to monitor them. Its chairman, Rostin Behnam, has also warned that election contracts would “ultimately commoditize and degrade the integrity” the electoral process.
The co-founders of Kalshi celebrated Cobb’s decision Thursday.
“Today marks the first trade made on regulated election markets in nearly a century,” Tarek Mansour said in a statement to CNN. “The Kalshi community just made history and I know we are only getting started!”
“WE’RE LIVE,” Luana Lopes Lara added on X.
John Aristotle Phillips, the CEO of PredictIt, another prediction market embroiled in a legal fight with the CFTC, similarly celebrated Cobb’s decision as a victory “for all who believe in the integrity and transparency of election markets.”
But Cantrell Dumas, the director of derivatives policy at Better Markets, a non-profit organization that advocates for financial reform, said the court “missed an opportunity to safeguard both financial markets and democratic processes from undue speculative risk” and warned it could open “the floodgates to unprecedented gambling on U.S. elections, eroding public trust in both markets and democracy.”
The CFTC declined to comment on Cobb’s ruling but quickly appealed the judge’s ruling, asking for a stay.
The agency embarked on a broader clampdown on events-based betting earlier this year, proposing a rule that would explicitly ban contracts on the outcomes of elections, awards shows and sports, among others things.
Behnam, citing a “significant uptick in the number of event contracts listed for trading by CFTC-registered exchanges,” said in a May statement that they “would push the CFTC, a financial market regulator, into a position far beyond its congressional mandate and expertise.”
“To be blunt, such contracts would put the CFTC in the role of an election cop,” he added.
This story and headline have been updated with additional developments.
