A federal appeals court has rejected an attempt by U.S. financial regulators to block derivatives trading platform Kalshi from offering contracts that let people make speculative bets on the outcome of U.S. elections.
The U.S. Court of Appeals for the District of Columbia Circuit on Oct. 2 denied an emergency motion for a stay pending appeal filed by the Commodity Futures Trading Commission (CFTC). The CFTC had sought to halt a district court’s decision that allowed Kalshi to offer financial market instruments enabling Americans to legally bet on elections in a regulated marketplace.
Circuit Judge Patricia Millett, writing for the three-judge panel, said the CFTC had not demonstrated sufficient evidence that the contracts would cause irreparable harm to the public or undermine the integrity of U.S. elections while the CFTC’s appeal is heard.
“Because the Commission has failed at this time to demonstrate that it or the public will be irreparably injured absent a stay, we deny its motion without prejudice to renewal should more concrete evidence of irreparable harm develop during the pendency of this appeal,” Millett wrote in the opinion.
Kalshi’s “Congressional Control Contracts” allow investors to bet on which political party will win control of the U.S. House of Representatives or Senate in federal elections. The CFTC argued that such contracts amount to illegal gambling or gaming and are prohibited under state laws.
The court found that the regulatory agency failed to substantiate claims that these contracts would lead to market manipulation or distort election outcomes.
During a Sept. 19 hearing, both sides presented arguments before a three-judge appellate panel regarding Kalshi’s ”Congressional Race Contracts.” CFTC General Counsel Rob Schwartz expressed concerns about potential manipulation and public mistrust if individuals were allowed to wager large sums on election outcomes, while Kalshi’s attorney Yaakov Roth argued against these claims and stated there was no evidence of irreparable harm.
The ruling now allows Kalshi CEO Tarek Mansour’s platform to offer election-related contracts pending further legal proceedings.
