The American people can resume enjoying election betting on the outcome of the forthcoming presidential election, pitting Republican Party candidate Donald Trump against Democratic Party Candidate Vice President Kamala Harris. The federal appeals court ruled on Wednesday, October 2, 2024, against the Commodities Futures Trading Commission’s (CFTC) attempt to block the KalshiEx exchange platform from taking bets on the 2024 congressional elections.
The ruling by the appeals court rejected efforts by the CFTC to prevent KalshiEx from providing “Congressional Control Contracts.” In contrast, the agency lost a similar appeal in a lower court, where the KalshiEx case ended in favour of the exchange. According to a ruling by a three-judge panel on the CFTC vs. KalshiEx case, the CFTC failed to show how election betting would lead to political misinformation or introduce any negative consequences relating to the November 2024 elections. KalshiEx challenged an order in early September, temporarily preventing it from offering election betting services.
A New Era for Financial Markets
The latest decision in the KalshiEx case now means the earlier decision by a lower court will take effect, and the exchange platform will continue offering election betting on whether Democrats or Republicans will control the Congress after the November elections. Nonetheless, the ruling potentially allows the company to include presidential elections in their offering. KalshiEx CEO Terel Mansour said the company was “incredibly honored to bring safe, regulated, and trusted election markets to the US,” calling the judgment a “dawn of a new era for financial markets.”
KalshiEx is a financial exchange through which investors can trade different assets depending on the outcome of future events. The firm, founded in 2019, has covered various areas, including economics, international relations, the weather, and even the chance to spot aliens. The platform garnered over $30 million during their 2021 Series A funds drive led by Sequoia Capital. The founders assert that the firm is the first CFTC-regulated entity that brings trading directly to the future of events. Investors are allowed to take a yes or no position on the outcome of a future event based on event contracts, which are their unique asset class.
Fear of Spreading Misinformation
The CFTC vs. KalshiEx legal battles go back to September 2023, when the agency blocked the exchange from conducting election betting relating to congressional elections. CFTC opined then that such a form of betting would be contrary to the public interest and bordered towards illegality in some states. According to CFTC, the contracts offered by KalshiEx would spread misinformation and even influence some people’s perceptions of particular political parties or candidates. The company felt aggrieved and filed a legal suit, where the court termed the regulator’s ideas “capricious and arbitrary.”
District of Columbia District Judge Jia Cobb found that KalshiEx’s contracts didn’t violate the law. However, the commission temporarily paused Judge Cobb’s orders as it sought a stay pending the appeal it just lost. The decision on Wednesday now means the company can continue its unique election betting program.
$100 Million in Election Betting
The win in the KalshiEx case will likely send a positive message to other companies in the prediction markets. Some sites, such as the crypto-backed BET and Polymarket, which authorities seek to ban, take bets, which would now join KalshiEx in taking bets as big as $100 million in election betting.
The outcome of the CFTC vs. KalshiEx case will go a long way in making the exchange platform stand head over shoulders among competitors. As soon as the courts pronounced themselves on the matter, the KalshiEx website was awash with activity covering two types of event-based contracts relating to election betting, where a total of $45,000 worth of contracts had been purchased by nightfall.
