CFTC Takes Action Against Kalshi’s Election Prediction Markets

The Commodities and Futures Trading Commission (CFTC), despite losing its initial case against prediction marketplace Kalshi, has filed a new motion to stop the company from offering prediction markets for the upcoming elections in November.

While the CFTC lost its initial case after a judge ruled that the regulatory agency overstepped its authority in banning the contracts, it continues to fight for its rule while working on an appeal. District Court Judge Jia Cobb ruled that the contracts should be allowed, stating, “…Congress did not authorize the CFTC to conduct the public interest review it conducted” on the contracts. Following this, the CFTC appealed to the DC Circuit Court, which led Kalshi to pause its election contracts within eight hours of listing them.

Now the CFTC is arguing that the ruling should be paused while the appeals process is ongoing. In a filing on Saturday, the agency claimed that any financial damages Kalshi might incur by missing the current election season, “…pale compared to the harm that would flow from allowing election gambling on U.S. futures markets.”

The CFTC’s reply to support its motion to stay the judgment pending appeal presents a legal argument over contested terms like “gaming” and “gambling.” The agency asserts that since Kalshi’s contracts involve staking something of value on election outcomes, they fall within the ordinary definition of ‘gaming,’ thus granting the CFTC jurisdiction.

In response, Kalshi contests this notion, arguing that election prediction markets are not “gaming.” Kalshi’s filing states, “An election is not a game. It is not staged for entertainment or for sport. And, unlike the outcome of a game, the outcome of an election carries vast extrinsic and economic consequences.”

Both the CFTC and Kalshi agree that unregulated trading on prediction markets could lead to market manipulation. The CFTC referenced documented examples of prior manipulations, particularly mentioning Polymarket, which allegedly experienced a significant manipulation attempt by traders betting on Vice President Harris.

While Kalshi acknowledges the potential for bad practices, it points out that other election prediction markets (including Polymarket and PredictIt) are currently operating without federal oversight, often cited by media for their predictive data. Kalshi argues that a stay would do nothing for election integrity and would instead confine all election trading to unregulated exchanges, harming the public interest.

Conversely, the CFTC dismissed Kalshi’s argument as “sophomoric,” stating, “A pharmacy does not get to dispense cocaine just because it is sold on the black market.” The agency concluded that election gambling on U.S. futures markets poses a grave threat to election integrity, and the existence of unregulated platforms does not justify allowing such gambling to spread.