Kalshi political markets frozen in new legal U-turn

The Kalshi "political betting" saga continues, as the company has been fighting in court with the Commodity Futures Trading Commission (CFTC) since 2023. The argument arose from lack of clarity on whether Kalshi could offer "prediction markets" on political events in the United States, which the CFTC claims are effectively political betting markets, which are prohibited.

Kalshi saga continues as markets are suspended and a ruling is expected

Kalshi has repeatedly argued against this opinion, saying that the CFTC could not regulate prediction markets on political events or prohibit them altogether as it lacked a legal basis. The case has been stuck in court, with several big developments over the past week. First, a federal judge sided with Kalshi, enabling the company to proceed with its prediction markets, with Kalshi actually launching them in full last Thursday.

It was all going well for several hours until the DC Circuit of Appeals, where the case is held, sided with the CFTC and issued a temporary stay on Kalshi offering election markets on its platforms, throwing another monkey wrench in the works.

Where the lower circuit court has argued that the CFTC had exceeded its powers in over-regulating Kalshi, and that its contracts did not involve unlawful activity, the DC Circuit of Appeals said that there was an actual risk of short-term market manipulation tied to politics.

This comes at a crucial moment for the electoral cycle with voters vastly divided and many, especially those on the right, believing that the electoral process in the country has been rigged – fears no less stoked by conspiracy theorists who have thin evidence to present.

Kalshi’s political markets fate now rests with the DC Circuit of Appeals

Kalshi has urged the DC Circuit of Appeals to reconsider quickly as it would face severe and possibly irreparable harm from any further delays. Kalshi has already presented its arguments to the DC Circuit of Appeals and urged the court to offer a ruling on the matter by the end of business today.

Should Kalshi get blocked once again, this would be the first definitive win that the CFTC has secured against a prediction market platform. It could also pave the legal way for the regulator to shutter PredictIt, the other prediction market platform operating in the country.

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