Federal judge allows prediction market Kalshi to offer betting on upcoming US elections

(CNN) — A federal judge made way on Thursday for legal political gambling in the United States, rejecting a federal watchdog’s last-minute effort to delay a prediction market from offering bets on the November elections.

The platform, Kalshi, launched congressional control contracts early Thursday afternoon, which allow Americans to place bets on which party will be in control of the House and Senate in 2025. The Commodity Futures Trading Commission, which argued that such wagers were illegal and could harm the integrity of elections, appealed the judge’s decision to the DC Circuit shortly after it was issued.

Last week, District Judge Jia Cobb in Washington, DC, sided with Kalshi in its dispute with the CFTC and formally released her opinion Thursday, saying the agency exceeded its statutory authority when it blocked Kalshi from offering the contracts last year.

“Kalshi’s contracts do not involve unlawful activity or gaming. They involve elections, which are neither,” Cobb wrote in her opinion. She also denied a request by the government during Thursday’s hearing to block Kalshi from offering contracts pending its appeal.

Kalshi had warned that pausing Cobb’s ruling would be “devastating,” dismissing the agency’s request as “an attempt to run out the clock” and “win in practice even after losing in court,” in filings earlier this week. The company also pointed to the rise of Polymarket, an offshore, unregulated crypto-based prediction market that has risen in popularity following the CNN debate in June.

Since the monthslong legal dispute between Kalshi and the CFTC began in 2023, the New York-based startup has insisted the contracts are in the public interest because they could provide accurate data for election forecasting and allow people to hedge their bets on different outcomes. The CFTC has argued that the contracts count as illegal gambling and that it doesn’t have the resources to monitor them. Its chairman, Rostin Behnam, has also warned that election contracts would “ultimately commoditize and degrade the integrity” the electoral process.

The co-founders of Kalshi celebrated the decision Thursday.

“Today marks the first trade made on regulated election markets in nearly a century,” Tarek Mansour said in a statement to CNN. “The Kalshi community just made history and I know we are only getting started!”

And Luana Lopes Lara said on X, “WE’RE LIVE.”

John Aristotle Phillips, the CEO of PredictIt, another prediction market embroiled in a legal fight with the CFTC, similarly celebrated the decision as a victory “for all who believe in the integrity and transparency of election markets.”

But Cantrell Dumas, the director of derivatives policy at Better Markets, a non-profit organization that advocates for financial reform, said the court “missed an opportunity to safeguard both financial markets and democratic processes from undue speculative risk” and warned it could open “the floodgates to unprecedented gambling on U.S. elections, eroding public trust in both markets and democracy.”

The CFTC declined to comment on the judge’s decision.

The agency embarked on a broader clampdown on events-based betting earlier this year, proposing a rule that would explicitly ban contracts on the outcomes of elections, awards shows and sports, among others things.

Behnam, citing a “significant uptick in the number of event contracts listed for trading by CFTC-registered exchanges,” said in a May statement that they “would push the CFTC, a financial market regulator, into a position far beyond its congressional mandate and expertise.”

“To be blunt, such contracts would put the CFTC in the role of an election cop,” he added.

This story has been updated with additional developments.

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