Appeal dismissed

A US federal appeals court has rejected an appeal from the Commodity Futures Trading Commission (CTFC) which placed a block on prediction market Kalshi from offering contracts on the outcome of the US presidential election.

the CTFC appealed a lower court order which gave it permission to accept wagers on the election

Kalshi was legally blocked from offering the contracts after the CTFC appealed a lower court order which gave it permission to accept wagers on the election – something that is currently illegal in the US.

However, the US Court of Appeals for the DC Circuit determined the CTFC’s arguments that the contracts were against the public interest fell short.

Election betting rising

Prediction markets are under the spotlight as the November 5 presidential election draws nearer in the US. Recently, Polymarket sought an additional $50m of funding as activity on the platform exploded with the range of election bets and derivatives offered.

Polymarket has avoided the CTFC’s ire so far by blocking US IP addresses on the platform. Kalshi, in contrast, took the opposite approach by banning all non-US accounts from election betting, to lessen claims that the markets could be used by outside actors to influence the election.

Critics of election betting say it unduly influences the result of presidential races, while CTFC Chairman Rostin Benham complained that the contracts would turn the organization into an “election cop.”

However, the court ruled differently. It said: “Ensuring the integrity of elections and avoiding improper interference and misinformation are undoubtedly paramount public interests,” adding: “The problem is that the Commission has given this court no concrete basis to conclude that event contracts would likely be a vehicle for such harms.”

Potential new evidence

Concluding, the ruling stated: “The Commission has not substantiated that risks to election integrity are likely to materialize if Kalshi is allowed to operate its exchange during the pendency of this appeal. At this point, in other words, the commission has failed to make the essential showing of irreparable harm.”

Kalshi could face further legal challenges if new evidence is brought to light

The case was dismissed without prejudice, meaning that Kalshi could face further legal challenges if new evidence is brought to light. The court mentioned in the ruling that this could include large foreign buyers of contracts, political campaigns calling on their supporters to buy contracts, or evidence that Americans were being confused about the strength of potential candidates.

Kalshi restarted offering the contracts on its website just hours after the decision was announced.