Kalshi cleared to launch political prediction markets as CFTC vows to not give up

Kalshi has stolen another march on opponents, and mostly the Commodity Futures Trading Commission (CFTC) after a meeting that sought to stay the platform’s offering of political prediction market was resolved in favor of the platform, as the regulator was preparing an appeal.

In the end, Kalshi has been cleared to go ahead and launch its political betting markets, which it did on Thursday having received the go-ahead by District Judge Jia Cobb in Washington DC who decided on the same day as the rollout.

Kalshi finally cleared to offer political prediction markets

Kalshi contends that it offers a type of prediction market that is not gambling, but the CFTC equally insists that these contracts should be regulated under financial laws.

Commenting on the case, Kalshi co-founder Tarek Mansour had this to add: "The Kalshi community just made history, and I know we are only getting started. Now is finally the time to allow these markets to show the world just how powerful they are at providing signal amidst the noise, and giving us more truth about what the future holds."

Judge Cobb has so far not agreed with this argument. "Kalshi’s contracts do not involve unlawful activity or gaming. They involve elections, which are neither," he mused in his opinion released on Thursday. The CFTC has vowed to respond by seeking further measures against the decision.

However, Kalshi has celebrated the opportunity to roll the red carpet of political betting offering a market on which party would win Congress in the November elections. What is more important is that this is the first time a political betting platform has been cleared to launch betting markets on politics in any US jurisdiction.

Up until now, such platforms have occupied a difficult legal space. Polymarket, an offshore rival, has been lambasted not just by the CFTC but also by Kalshi, which insisted in front of Judge Cobb that should the regulator’s appeal be granted, it would have a "devastating impact" on channeling people into the reach of companies that are not based in the United States.

Small win for Kalshi in the short-term, but CFTC on a warpath

In defending itself Kalshi has used a rather popular argument, which Polymarket in fact shares.

All companies in this space claim that the prediction markets on elections they offer are in the public interest as they are shared with researchers and analysts, as well as sociologists and psephologists, who can use the aggregated data. However, the CFTC has taken a dim view of this argument.

In fact, the regulator insists that political betting, whether in the form of prediction markets or anything else, still boils down to gambling. It undermines the electoral process, which is sacred in the United States, and commercializes elections.

The fact of the matter is, argues the CFTC, there is about a $100m incentive for bad actors to try and influence the outcome of an election, a regulator attorney said. What happens next remains to be seen, but Americans will most likely be able to place a bet on the November elections either way.

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