Kalshi Wins Ruling on Stay, Paving Way for Betting on Presidential Election

Less than 24 hours after Tuesday night’s U.S. vice-presidential debate, Kalshi won a key ruling that will enable the website to offer betting markets on next month’s presidential election.

On Wednesday, the U.S Court of Appeals for the District of Columbia Circuit denied an emergency stay filed last month by the U.S. Commodity Futures Trading Commission (CFTC). In a 15-page ruling, the circuit court ruled that the CFTC failed to “demonstrate that the public will suffer irreparable injury” absent a stay pending appeal. Tarek Mansour, CEO of Kalshi, celebrated the ruling on Twitter, remarking that markets on the U.S. presidential election are finally “legal.”

The ruling by the three-judge panel came nearly a month after a U.S. District Court judge ruled in favor of Kalshi in a Sept. 6 decision. The CFTC, an independent federal agency that regulates U.S. derivatives markets, responded by filing an emergency appeal with the circuit court to stay the ruling.

On Sept. 12, the D.C. District court entered a brief administrative stay regarding the Kalshi ruling. The order from the circuit court on Wednesday effectively dissolves last month’s administrative stay.

Opening the Floodgates

Kalshi is a regulated exchange and prediction market that allows users to trade contracts on a broad range of events related to politics, from unemployment trends to a Federal Reserve interest rate cut, as well as inflation and a potential government shutdown. But the matter in KalshiEx LLC vs. the CFTC centered on whether the designated contract market could list contracts on various election results before voters head to the polls in November.

Last year, the CFTC issued an order prohibiting Kalshi from listing “Congressional Control Contracts” for trading on its platform. The contracts give users the opportunity to wager on which party will gain power in January when the 119^th U.S. Congress is formed. Last month, users wagered about $50,000 on the market during an eight-hour window before Kalshi pulled the contracts.

The ruling also gives Kalshi the option of offering contracts on the U.S. presidential election. The CFTC sought an injunction that would have prevented Kalshi from listing and trading the election contracts pending a full appeal. During an intense hearing on Sept. 19, attorneys from both sides argued over whether the contracts could be used as a mechanism to manipulate activity dictating the election.

Hours after Wednesday's circuit court decision, Kalshi's markets on the congressional control contracts returned to its platform. A market on which party will win the Senate received $45,000 in wagers, as the Republican party garnered 75% of the action as of 4:20 p.m. ET. As for a comparable market on the House election, Democrats received about 63% of the handle on Wednesday afternoon.

Harris-Trump Race Virtually Deadlocked

At the same hearing last month, attorneys for the CFTC argued that Kalshi's political contracts will not only create monetary incentives to vote, but also incentivize nefarious actors to spread misinformation about the election.

Yaakov Roth, an attorney who argued on behalf of Kalshi, countered that an injunction would unfairly benefit other platforms that currently operate on unregulated markets. One such exchange, Polymarket, handled more than $1 billion on contracts related to the U.S. presidential market as of last month.

While individuals in the U.S. are prohibited from making wagers on Polymarket, the platform is easily accessible through illegal VPNs. PredictIT, another site that accepts bets on U.S. political markets, is operated by Victoria University of Wellington in New Zealand.

“A stay would accomplish nothing for election integrity; its only effect would be to confine all election trading activity to unregulated exchanges,” attorneys for Kalshi wrote in a brief.

In some respects, the Court agreed with the CFTC’s position that the contracts may be susceptible to manipulation by various political parties. If foreign investors somehow bypass Kalshi’s restrictions on overseas traders, such activity would “substantiate” the CFTC’s concerns about harmful interference, the panel wrote.

An attempt by a political campaign to encourage supporters to purchase the congressional contracts could suggest that the contracts “harm election integrity.” Finally, trends on the markets may confuse voters about the viability of certain candidates, according to the judges. Those trends may satisfy the CFTC’s burden, the panel concluded.

The dissolution of the stay does not necessarily mean that the circuit court will deny a full appeal. Since the CFTC may identify “cognizable harms,” going forward the ruling is without prejudice to the commission’s renewal of its stay request during the appeal, according to the court.

But it is debatable whether the statutory text within the CFTC’s regulations allow the commission to prohibit the event contracts, the court found. Furthermore, the CFTC has not “substantiated” that risks to election integrity are likely to materialize if Kalshi is allowed to operate its exchange during the appeal, the judges wrote.

When reached by Action Network on Wednesday, a CFTC spokesman declined comment.

The U.S. presidential election is virtually deadlocked, according to several national polls. While Vice President Kamala Harris leads former President Donald Trump on PredictIt, Trump has closed the margin since Tuesday night’s vice-presidential debate.