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The U.S. Commodity Futures Trading Commission (CFTC) has filed an emergency motion to block Kalshi, a financial exchange and prediction market, from offering election betting contracts in the wake of a court ruling in the company's favor.
The five-page filing was made shortly after a federal judge’s decision to overturn a CFTC order blocking Kalshi’s election markets.
“The public interest lies with granting the CFTC a temporary stay,” according to the court filing.
“As laid out in the CFTC’s public interest analysis in its summary judgment briefing, the relevant contracts could potentially be used in ways that would have an adverse effect on election integrity, or the perception of election integrity, and could put the commission in the position of investigating election-related activities.”
The CFTC requested that the court “stay the vacatur” for 14 days to give the court time to issue its detailed opinion explaining why it overruled the order.
The commission argued that “without the benefit of the court’s reasoning, it is unable to make an informed decision whether to appeal, nor is it able to fully brief a motion for stay pending any forthcoming appeal”.
“Time is of the essence in the issuance of the stay,” the CFTC said.
It supported its request by noting that Kalshi has already announced election betting on its website.
“Election markets are coming to Kalshi,” the company wrote on its platform on Friday. “We did it. U.S. election markets are coming to Kalshi. Stay tuned for more info, and God bless America!”
The CFTC’s filing came on the same day that Judge Jia Cobb, with the U.S. District Court for the District of Columbia, ruled in favor of Kalshi offering markets that allow people to wager on who will win the U.S. election on November 4.
Event contracts are financial instruments that entitle a purchaser to payment based on the occurrence or non-occurrence of a real-world event. Like other derivatives, they are used as a tool to mitigate risk.
Kalshi, founded in 2018 by CEO Tarek Mansour, allows users to trade on real-world outcomes.
The company filed a lawsuit in November 2023 challenging the CFTC’s decision to block it from offering specific event contracts related to the U.S. election.
Mansour told Bloomberg that the ruling was a milestone.
“Election markets are now legal in the United States for the first time in 100 years,” Mansour said.
Alexander Grieve, Paradigm vice president of government affairs, said allowing election betting contracts was important because “American companies need the ability to hedge political risk”.
“While Kalshi isn’t a crypto company, we felt compelled to intervene in this case because we believe that prediction markets are one of the potentially revolutionary use cases for crypto,” Paradigm, a San Francisco-based investment firm, wrote in a statement that accompanied an amicus brief it filed in support of Kalshi in the case.
“Moreover, event contracts on congressional control would provide crypto companies with important information to guide their corporate strategies and provide them with a useful tool to hedge regulatory risk,” the company said.
Cobb’s ruling overturned a CFTC order issued in September 2023 that argued that offering bets on elections was contrary to the public interest.
“The approval of political event contracts of the type presented… would require the CFTC to exercise its oversight and enforcement activities in the manner of an election cop,” CFTC chairman Rostin Behnam said in a statement accompanying the September 2023 order.
The congressional control contracts proposed by Kalshi “involve gaming or activity that violates State or Federal law”, Behnam added at the time.
