CFTC Appeals Court Ruling on Kalshi

The U.S. Commodity Futures Trading Commission (CFTC) claims a district court judge misinterpreted its authority in blocking prediction market Kalshi from offering election bets.

In an appellation brief filed on Wednesday in the U.S. Court of Appeals for the District of Columbia Circuit, the CFTC requested a reversal of the prior judgment and reinstatement of their original order.

The CFTC's brief states, "The district court erred at every turn, rejecting the plain meaning of, or simply confusing, four separate terms or phrases in the statute," including terms like "gaming" and "transactions."

This dispute started after the CFTC determined that Kalshi’s election contracts were "contrary to the public interest" and involved gaming. Kalshi filed a lawsuit in November 2023.

In September, Judge Jia M. Cobb stated that the CFTC surpassed its statutory authority and ruled that Kalshi's contracts don't involve "unlawful activity or gaming." The CFTC swiftly appealed this ruling, but a federal appeals court upheld Cobb's decision on October 2.

Following the judgment, Kalshi began accepting bets on the U.S. presidential election outcome.

The CFTC's brief covers the Commodity Exchange Act, which aims to protect market participants from fraudulent practices. The Act, established in 1936, provides the regulatory framework for commodity futures.

In its arguments, the CFTC expressed concerns about the potential effects of Kalshi’s contracts on election integrity, asserting that they could financially incentivize voters or spread misinformation.

The agency maintained that the court misconstrued terms like "gaming," declaring it synonymous with "gambling," especially in contexts involving stakes in elections.

In parallel, the CFTC is developing rules aimed at banning bets on political events, a proposal voted on in May.