Election Markets Can Stay After CFTC Withdraw Court Challenge

The Commodity Futures Trading Commission (CFTC) has formally requested the D.C. Circuit Court to withdraw its appeal concerning the legitimacy of election betting markets. This strategic move not only clears the path for future election wagering through platforms like Kalshi, Crypto.com, and Robinhood, but also signals a significant shift in regulatory attitudes towards prediction markets within the gambling landscape.

This decision represents a pivotal endorsement from the CFTC regarding the expansion of sports prediction markets, which have been a focal point of ongoing discussions among state regulators and various sports organizations.

Legal Implications: The CFTC vs. Kalshi and Election Markets

The saga began when Kalshi launched a market for the 2023 U.S. presidential election, prompting the CFTC to disapprove the event contract. In a press release dated September 2023, the CFTC stated, “Upon reviewing the complete record, the commission determined that these contracts pertain to gaming activities that violate state law and contradict the public interest.”

However, Kalshi challenged the CFTC’s ruling in court. After a year-long legal battle, the U.S. Court of Appeals for the District of Columbia ruled in favor of Kalshi, thereby allowing the market to resume operations.

In her ruling, Judge Patricia Millett pointed out that the CFTC had failed to demonstrate how these markets could potentially harm the commission or the public at large. This favorable decision enabled Kalshi’s market to achieve over $500 million in trading volume.

In the wake of this ruling, Donald Trump Jr. emerged as a strategic advisor for Kalshi, while his father appointed Kalshi board member Brian Quintenz to lead the CFTC. Quintenz has advocated for the ongoing development of both election and sports prediction markets.

The Enduring Presence of Prediction Markets

Kalshi CEO Tarek Mansour expressed his elation over the CFTC’s request to withdraw the appeal, stating on X: “Election markets are here to stay. Prediction markets have faced bans, censorship, and limitations for decades. This victory fortifies their right to exist and flourish.”

Under the previous Trump administration, Kalshi broadened its offerings to include a variety of sports markets, generating event contracts for single-match outcomes in basketball, football, baseball, and ice hockey.

Despite complaints from six state regulators following the March Madness markets—which amassed over $400 million in trading volume—Kalshi countered by initiating lawsuits and has thus far achieved favorable outcomes in both Nevada and New Jersey courts.

Kalshi consistently contends that the CFTC holds exclusive jurisdiction over its operations, a claim that is increasingly supported by recent rulings. The latest actions taken by the CFTC suggest a willingness to permit Kalshi and similar platforms to expand their markets further.

While the CFTC had initially scheduled a meeting to discuss sports markets, it was subsequently canceled. Following this, the NBA, similar to the MLB, raised concerns regarding the absence of regulatory oversight on these markets, likening them to forms of sports betting.

A Potential Path to Legal Sports Betting Across All States

Kalshi has marketed its platforms as providing legal sports betting opportunities in all 50 states. With recent court rulings siding with the firm, the CFTC’s action further reinforces its position. The federal landscape around betting laws is intricate, particularly since the repeal of PASPA in 2018 allowed states to legalize sports betting.

The rise of alternative betting avenues, including prediction markets and sweepstakes, introduces additional complexities. Should the appeals court accept the CFTC’s move to dismiss the case, bettors could effectively gain access to legal election and sports betting across the United States.

However, it is crucial to note that the court may still reject the CFTC’s request if deemed contrary to the public’s interest. Nevertheless, recent rulings suggest that an unfavorable outcome for Kalshi is unlikely at this juncture.

In conclusion, the evolving dynamics within the gambling sector, particularly concerning prediction markets, signify a transformative era for both regulators and stakeholders. As the landscape continues to adapt, staying informed will be essential for all participants in the gambling industry.

Adam Roarty is a seasoned writer with extensive experience in the gambling industry. Over the past five years, he has contributed as a content writer and editor for reputed platforms like Oddschecker, CoinTelegraph, and Gambling Industry News, offering deep insights into the realms of sports betting and online gambling.