The U.S. Court of Appeals for the District of Columbia Circuit ruled that prediction markets that allow betting on U.S. elections are legal.
The decision came in an October 2 ruling dismissing an appeal by the U.S. Commodity Futures Trading Commission (CFTC), which urged the court to issue an administrative stay on an earlier ruling against the regulator in its case against the Kalshi prediction market.
The court found that the CFTC failed to prove that the public would suffer irreparable harm from offering election-based contracts in the US.
Tarek Mansour, founder of the American prediction market Kalshi, shared on X:
“US presidential election markets are legal. Officially. Finally. Kalshi has the upper hand.”
As a result, Kalshi can now resume offering US election-related contracts. Nevertheless, a new motion for a stay can be extended if “corroborating evidence emerges,” the Circuit judges pointed out.
The CFTC banned Kalshi from offering politically related contracts on its platform on September 22, 2023, after the prediction market asked the regulator to draw up a contract based on which party would control the US Congress this year.
So the prediction market sued the CFTC, claiming the regulator’s ban was beyond its authority. Judge Cobb then sided with Kalshi, leading to the request for a stay.
A potential win for crypto platforms
U.S. lawmakers urged a CFTC crackdown on U.S. election prediction markets in a letter to Chairman Rostin Behnam on August 5.
Among the eight lawmakers who signed the document were Senators Elizabeth Warren (D-MA), Chris Van Hollen (D-MD), and Sheldon Whitehouse (D-RI), along with Representatives Eleanor Holmes Norton (D-DC) and Jamie Raskin . (D-MD).
The document asserted that elections are not a for-profit enterprise and that enforcement action against the platforms offering these contracts would restore confidence in elections.
On the other hand, Congressman Richie Torres also addressed a letter to CFTC Chairman Behnam asking for regulation of election-related prediction markets instead of the ban proposed by lawmakers in August.
Kalshi’s recent legal victory could benefit crypto-native prediction markets, such as BET and Polymarket, in case the CFTC decides to heed the enforcement call.