CFTC Drops Appeal in Kalshi Election Prediction Markets Case

The Commodity Futures Trading Commission (CFTC) moved Monday to drop its appeal of a court decision that allowed trading platform Kalshi to offer betting on election outcomes, likely ending a regulatory battle that began under the previous presidential administration last year.

The CFTC filed its request to voluntarily dismiss the case with the US Court of Appeals for the District of Columbia Circuit on May 5, agreeing that both sides of the case would be responsible for its legal costs and fees.

Kalshi Offered Election Markets While Court Battles Continued

According to Reuters, a source with knowledge of the matter said that the CFTC voted 3-0 in favor of dropping its appeal, with one abstention. 

Last September, Kalshi began offering contracts allowing users to back either the Democratic or Republican Party to take control of the US House of Representatives or Senate in the 2024 elections following a ruling in favor of allowing such contracts by a District Court judge. But those markets remained up for only a few hours, after the Court of Appeals in the DC Circuit, which put a temporary freeze on the markets until it could rule on the case. 

The CFTC argued that prediction markets on elections were fundamentally the same as election betting, which isn’t authorized anywhere in the United States. But in early October, the Court of Appeals lifted that temporary freeze, rejecting an emergency bid from the CFTC to completely halt trading on election markets until the full appeal could be heard. 

That led Kalshi to offer a variety of markets on the 2024 US elections in November. Since that time, Kalshi has added markets on political outcomes in the United States and throughout the world, including offering contracts on the recent Canadian elections and on who will become the next pope. 

Decision Leaves Lower Court Ruling in Effect

With the CTFC looking to drop the case, it now appears there will be no appeal to hear, and that the lower court ruling allowing Kalshi and other derivatives platforms to offer such markets will remain in effect.

“Today is historic. We have always believed that doing things the right way, no matter how hard, no matter how painful, pays off,” Kalshi CEO Tarek Mansour said in a statement on Monday. “This result is proof of that. Kalshi’s approach has officially and definitively secured the future of prediction markets in America.”

Kalshi board member Brian Quintenz was nominated by President Donald Trump to chair the CFTC in February, though he has yet to receive a confirmation vote. Donald Trump Jr. also serves as an advisor for Kalshi. 

The CFTC may no longer be pursuing action against Kalshi, but there are still legal and regulatory questions surrounding the prediction platform. 

In March, the Nevada Gaming Control Board issued a cease and desist order to Kalshi, telling the company it could not offer contracts on sports or political events in the state without a gaming license. The American Gaming Association has raised similar questions with the CFTC, though it remains to be seen what stance the regulatory body will take on sports-based markets.

“We believe these sports events contracts are problematic for a variety of public policy reasons,” The AGS said in a letter to the CFTC in March.