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

CNN
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A federal judge on Thursday cleared the way for the legalization of political gambling in the United States, rejecting a federal regulator's last-minute attempt to block a prediction market from offering bets on the November election.

The Kalshi platform introduced so-called Congressional Control Contracts early Thursday afternoon, allowing Americans to bet on which party will have the majority in the House of Representatives and the Senate in 2025. The Commodity Futures Trading Commission argued that such bets were illegal and could damage the integrity of the election and filed an appeal with the DC Circuit shortly after the ruling was announced.

Last week, District Judge Jia Cobb in Washington, DC, sided with Kalshi in his dispute with the CFTC, issuing her official opinion on Thursday, saying the agency exceeded its legal authority when it blocked Kalshi from offering the contracts last year.

“Kalshi's contracts have nothing to do with illegal activities or gambling. They have to do with elections, and that is neither one nor the other,” Cobb wrote in her statement. During Thursday's hearing, she also rejected a government request to bar Kalshi from awarding contracts pending the appeal.

Kalshi had warned that a stay of Cobb's ruling would be “devastating,” and dismissed the agency's request in filings earlier this week as an “attempt to pull the trigger” to “win in practice even if you lost in court.” The firm also pointed to the rise of Polymarket, an unregulated crypto-based offshore prediction market that has gained popularity since the CNN debate in June.

Since the months-long legal battle between Kalshi and the CFTC began in 2023, the New York-based startup has insisted that the contracts are in the public interest because they could provide accurate data for election forecasts and allow people to hedge their bets on different outcomes. The CFTC argues that the contracts are considered illegal gambling and that it does not have the resources to monitor them. Its chairman, Rostin Behnam, also warned that election contracts would “ultimately commodify the electoral process and compromise its integrity.”

Luana Lopes Lara, a co-founder of Kalshi, celebrated the decision on Thursday, writing on X: “WE ARE LIVE.” The CFTC declined to comment.

The agency launched a broader crackdown on event-based betting earlier this year, proposing a rule that would explicitly ban betting on the outcome of elections, awards ceremonies, sporting events and other events.

Behnam cited a “significant increase in the number of event contracts listed for trading on CFTC-registered exchanges” and said in a statement in May that these would “push the CFTC, as a financial markets regulator, into a position that goes far beyond its mandate and authority in Congress.”

“To be clear, such contracts would put the CFTC in the role of election police,” he added.