Court Backs Kalshi vs CFTC: Election Bets Are Legal
- The CFTC is locked in a tussle with the prediction platform Kalshi.
- An appeal court has thwarted the commission’s attempt to halt election prediction bets.
- Other platforms are facing heightened scrutiny from the regulatory body.
The upcoming U.S. elections have become quite the industry chatter, leading to an explosive rise in prediction markets. These platforms allow individuals to place bets on various election outcomes, ranging from who will win to the likelihood of specific policies being implemented. However, the surge in activity has also attracted significant regulatory scrutiny, particularly from the U.S. Commodity Futures Trading Commission (CFTC).
Currently embroiled in a legal battle with one prominent prediction platform, Kalshi, the CFTC has made several attempts to shut down ongoing bets related to the upcoming elections. However, these efforts have consistently been rejected.
Court Rejects CFTC’s Bid to Shut Kalshi
The ongoing legal dispute between the CFTC and Kalshi is intensifying, but not in favor of the regulatory body. On Wednesday, October 3, 2024, the United States Court of Appeals for the District of Columbia Circuit dismissed the CFTC’s request for a stay order that sought to halt Kalshi’s offerings of derivatives wagering on the November U.S. presidential election.
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This ruling follows the commission’s September 6 filing for an “emergency stay order,” which came after it lost a ruling in its long-running battle against Kalshi.
According to the Appeal court, the CFTC failed to justify its claims for the request, lacking sufficient evidence to demonstrate that “irreparable harm” would occur if Kalshi continued its operations. The court pointed out that the commission’s concerns about potential market manipulation and the integrity of the electoral process were largely speculative and unfitting to justify its request.
“The Commission has failed to demonstrate that it or the public will suffer irreparable injury absent a stay pending appeal, and therefore its motion for a stay is denied without prejudice to renewal should substantiating evidence arise. The administrative stay is hereby dissolved,” the ruling read.Despite the setback, the court’s ruling leaves an open window for the CFTC to revisit the case should substantial evidence emerge. This suggests the commission may launch another attempt, particularly as it intensifies its scrutiny of prediction platforms.
CFTC Frowns at Election Bets
During a recent interview, CFTC Chair Rostin Behnam highlighted the commission’s intent to crack down on prediction markets that violate regulations, specifically naming Kalshi and decentralized prediction platform Polymarkets.
According to the Chair, unregulated prediction markets involve several risks. He emphasized that they could influence voter behavior, potentially undermining democratic processes.
The commission has affirmed that the Commodity Exchange Act prohibits contracts tied to certain sensitive topics. It affirmed its readiness to wield its authority to crack down on platforms enabling such.
“ If anyone, Polymarket or otherwise, conducts themselves in a way that breaks the law we will use our civil enforcement authority to make sure that conduct stops,” the CFTC Chair stated.On the Flipside
- The recent ruling in favor of Kalshi may set a precedent that enables other prediction markets in the United States to operate with less concern about regulatory actions.
- Odds for both Donald Trump and Kamala Harris are still swinging on Polymarket’s forecast for the upcoming November elections.
- The CFTC previously went after Polymarkets in January 2022, resulting in a $1.4 million civil penalty to settle the charges.
Why This Matters
The latest ruling marks another major blow for the CFTC in its quest to oversee prediction markets.
Find out more about the CFTC’s recent enforcement actions here:
Uniswap Fined in Latest CFTC Showdown Over Illegal Offerings
Read this article for recent comments fromTelegram CEO Pavel Durov over the changing privacy standards:
On Bail Telegram CEO Justifies Widened Privacy Policy
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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