CFTC Withdraws Controversial Legal Action against Kalshi in Election Markets Dispute
Updated Article:
Posted on: May 6, 2025, 02:28h.
Last updated on: May 6, 2025, 02:28h.
Title Changed:New victory for Kalshi: CFTC drops appeal on election-linked contracts
Subheading:Prediction market operator Kalshi wins legal battle, paving the way for event contracts linked to US elections.
CFTC gives up the fight: Prediction market operator Kalshi scored a massive victory on Monday as the Commodity Futures Trading Commission (CFTC) decided to drop its appeal against the exchange. This decision allows Kalshi to offer event contracts linked to U.S. elections, marking a watershed moment for the prediction market industry.
Longtime legal battle:The legal battle between Kalshi and the CFTC dates back to October 2022 when the CFTC ordered Kalshi to cease offering contracts linked to domestic elections. At the heart of the dispute was the CFTC's stance that such forms of wagering are prohibited in the US. However, Kalshi argued that the yes/no propositions they offer are not the same as traditional sports bets.
Rising visibility:The ruling - which came a year before the 2024 presidential election - brought election "betting" into the mainstream in the US and brought prediction markets into the limelight alongside old guard sportsbooks. Election markets have traditionally been suppressed, facing bans, censorship, and limitations. However, this win solidifies their right to exist and thrive in the US market.
Filing details:CFTC’s Monday filing with the U.S. Court of Appeals for the D.C. Circuit indicated a 3-0 vote in favor of dropping the appeal, with one abstention.
Favorable regulatory climate:While Kalshi Contends with multiple state-level legal challenges, the CFTC's decision to drop the appeal could signal a shifting federal regulatory climate that is moving in Kalshi's favor. Founded in 2018 by Tarek Mansour and Luana Lopes Lara, Kalshi has taken steps to fortify its legal position, including adding former board member Brian Quintenz to its ranks, who was appointed as CFTC chairman by President Trump in January 2024[1].
Criticism and Controversy:Opponents believe the CFTC's decision to drop the appeal is detrimental to Americans and could jeopardize election integrity. Stephen Hall, legal director, and securities specialist at Better Markets, stated, "In a stark betrayal of the public interest, the CFTC has decided to give up the fight and turn its back on election integrity, the protection of countless investors, and the agency's own ability to do the job Congress intended."
Impact on Kalshi and competition:The ability of Kalshi, along with Polymarket, PredictIt, and other derivatives exchanges to offer elections-linked contracts to US bettors and traders represents a significant advantage in the market. This form of investing or wagering was a multi-billion-dollar enterprise during the 2024 presidential election cycle and could attract more clients ahead of the 2026 midterm elections and the 2028 presidential election. This is especially significant because sportsbooks are forbidden from offering such wagers, and prediction markets already have the ability to operate in all 50 states, a luxury not afforded to gaming companies[2][3].
[1] Anders, H. (2024, March 15). Trump taps Quintenz as head of CFTC. CNBC. Retrieved from https://www.cnbc.com/2024/03/15/trump...[2] Yohe, J. D. (2025, May 6). Vast markets momentum: Klshi cftc ruling. American Banker. Retrieved from https://www.americanbanker.com/news/…[3] Joseph, H. T. (2025, May 6). Single ownership, cross-ownership, and market power in U.S. sports betting. Psychology of Sport and Exercise. Retrieved from https://www.sciencedirect.com/science/…[4] Beck, D. (2025, May 6). Prediction market operator Kalshi scores legal victory as CFTC drops appeal. The Hill. Retrieved from https://thehill.com/homenews/media/…[5] Markets reopen for election wagers as CFTC drops Kalshi appeal. (2025, May 6). MarketWatch. Retrieved from https://www.marketwatch.com/story/m…[6] Kalshi's win greenlights election market derivatives trading. (2025, May 6). The Press Enterprise. Retrieved from https://www.pressenterprise.com/bus…
- The financial implications of the CFTC's decision to drop its appeal against Kalshi could have a significant impact on the future of the prediction market industry.
- The legal victory for Kalshi in February 2025 has opened up possibilities for the trading of event contracts linked to US elections, potentially attracting more clients in the field of finance and business.
- The regulation of prediction markets has been a contentious issue, with critics arguing that the CFTC's decision to drop its appeal against Kalshi could jeopardize election integrity.
- The ruling in favor of Kalshi could signal a shift in the regulatory climate, making it more favorable for other prediction market operators such as Polymarket and PredictIt.
- Despite the victory in the CFTC appeal, Kalshi still faces multiple state-level legal challenges, highlighting the complex legal landscape that technology-driven businesses like Kalshi must navigate.
- The emergence of prediction markets as a legitimate form of financial business, alongside traditional sportsbooks, could disrupt the current landscape of the US gambling industry.
