U.S. Court Ruling on Prediction Markets for Elections
The U.S. Court of Appeals for the District of Columbia Circuit has made a significant ruling, confirming the legality of prediction markets that allow betting on U.S. elections.
Details of the Ruling
This landmark decision was issued on October 2, following an appeal by the U.S. Commodity Futures Trading Commission (CFTC) that sought to delay a previous ruling favoring the prediction market Kalshi.
The court concluded that the CFTC could not demonstrate that allowing these election-based contracts would lead to irreparable harm to the public.
Response from Kalshi’s Founder
Tarek Mansour, the founder of Kalshi, expressed his relief and excitement on X, stating:
“U.S. presidential election markets are legal. Officially. Finally. Kalshi prevails.”
Following this ruling, Kalshi is set to resume offering contracts related to U.S. elections, although the court has warned that the CFTC could file a new motion if sufficient evidence of public harm arises.
Background on the CFTC’s Actions
The CFTC initially banned Kalshi from offering political contracts on September 22, 2023, after the market requested to list a contract pertaining to which party would gain control of the U.S. Congress.
In response, Kalshi filed a lawsuit against the CFTC, asserting that the regulator’s prohibition exceeded its authority. Judge Cobb ruled in favor of Kalshi, leading to this recent appeal.
Implications for Crypto Prediction Markets
This ruling may signal a shift in favor of crypto prediction platforms. Recently, U.S. lawmakers called for the CFTC to intensify its crackdown on these markets, urging Chair Rostin Behnam for stricter enforcement in a letter dated August 5.
The letter, signed by prominent senators and representatives, asserted that elections should not be commercialized and that stringent enforcement against prediction markets would help restore trust in the electoral process.
Conversely, Congressman Richie Torres advocated for regulation of election-related prediction markets rather than outright bans, suggesting a more balanced approach to oversight.
The success of Kalshi’s case may also pave the way for other crypto-specific prediction markets, like BET and Polymarket, to thrive should the CFTC adopt a more lenient stance following the legal precedent set.