Prediction market Kalshi’s attempt to offer contracts tied to the U.S. 2024 election has been paused until after a hearing on Thursday, following a decision by Judge Jia M. Cobb of the U.S. District Court for the District of Columbia.
The judge issued a “temporary administrative stay” on Monday, marking another chapter in the ongoing legal dispute between Kalshi and the U.S. Commodity Futures Trading Commission (CFTC).
Last year, the CFTC barred Kalshi from offering “congressional control contracts,” leading the platform to sue the agency in November 2023. Although Judge Cobb recently ruled in favor of Kalshi and dismissed the CFTC’s block, the agency quickly sought an emergency stay. Monday’s order allows for a temporary stay until the conclusion of the hearing.
The CFTC has increasingly focused on event contracts, like those offered by Kalshi and Polymarket, which allow users to bet on various outcomes, including political events.
CFTC Chair Rostin Behnam has raised concerns about a surge in such contracts and proposed rules to prohibit political event bets, warning that allowing them would position the agency as an “election cop,” exceeding its regulatory authority.
Kalshi had been locked out of the 2024 election betting market while the case was pending. Following the previous ruling, Kalshi announced on its website that “U.S. election markets are coming to Kalshi,” positioning the platform to enter the election betting space in the final months before the November elections.
The decision marks a setback for prediction markets, where traders bet on various real-world outcomes, from political elections to financial trends. Although Kalshi does not use cryptocurrency, the crypto industry has closely watched the case. The venture capital firm Paradigm even submitted a friend-of-the-court brief supporting Kalshi’s position.
The CFTC had previously argued that offering such contracts would amount to unlawful gaming and could be against the public interest. However, Kalshi challenged this claim, calling the regulator’s decision “arbitrary and capricious.”
Kalshi also faces another battle as the CFTC considers a new rule that could ban regulated entities from offering contracts on political contests due to concerns over election integrity.
A growing number of industry leaders across the crypto and fintech sectors, including companies like Gemini, Crypto.com, and Robinhood, as well as influential blogger Scott Alexander, have voiced strong opposition to the proposed rule change that could ban political prediction markets.
Coinbase Chief Legal Officer Paul Grewal also warned that the proposed rule could ban a wide range of prediction contracts, such as those involving Nobel Prizes or the Oscars, without clear reasoning.
Grewal noted that the broad definition of “gaming” in the proposal could have unintended negative effects on emerging markets regulated by the CFTC.
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