Presidential election markets allowed after CFTC loses appeal against Kalshi
US Court of Appeals for the District of Columbia rules in favour of prediction market firm after Commodity Futures Trading Commission’s attempt to ban the market’s offering quashed
Legal election markets for the upcoming US presidential election have been approved after the US Court of Appeals for the District of Columbia rejected the Commodity Futures Trading Commission’s (CFTC) appeal.
The CFTC had been attempting to enforce a suspension on wagers placed on future presidential elections, after last year banning prediction market Kalshi from listing election markets.
Ahead of the November 5 election, both parties made their case in front of the Court of Appeals last month, with Judge Jia Cobb of the US District Court for the District of Columbia ruling in Kalshi’s favour on September 12.
However, later that evening, the CFTC was granted a stay by the appeals court. However, that appeal was then denied on Wednesday, October 2.
In its appeal, the CFTC argued that election markets could “incentivize the spread of misinformation by individuals or groups seeking to influence perceptions of a political party or a party candidate’s success.”
The CFTC used an example where company Delphi Analytica created a fake poll that claimed rock artist Kid Rock was ahead in the polls over Senator Debbie Stabenow in the November 2018 US Senate election in Michigan.
However, the court responded by pointing out that fake polls were not a new phenomenon and that CFTC failed to prove that the Kid Rock example manipulated betting markets and that Senator Debbie Stabenow won that election.
Though the court understood the commission’s arguments, it found the commission’s ability to ban event contracts “debatable” and ultimately ruled in favour of Kalshi.
Explaining how the court came to its decision, the ruling stated: “Ensuring the integrity of elections and avoiding improper interference and misinformation are undoubtedly paramount public interests, and a substantiated risk of distorting the electoral process would amount to irreparable harm.
“The problem is that the Commission has given this court no concrete basis to conclude that event contracts would likely be a vehicle for such harms.”
The ruling added: “In short, the concerns voiced by the Commission are understandable given the uncertain effects that Congressional Control Contracts will have on our elections, which are the very linchpin of our democracy.
“But whether the statutory text allows the Commission to bar such event contracts is debatable, and the Commission has not substantiated that risks to election.”
Following the decision, Kalshi’s website now displays markets such as “Who will win the presidency?” and “which party will win the Senate?”
In August, the CFTC’s betting ban was backed by five US senators and three congress members who argued they wanted to “prevent further corruption of our electoral system by moneyed interests.”