United States appellate court judges have grilled lawyers for the Commodity Futures Trading Commission and betting platform Kalshi at a hearing reviewing a lower court ruling on plans to launch political betting markets.
The Sept. 19 hearing at the DC Circuit Court of Appeals heard arguments from CFTC general counsel Rob Schwartz and Kalshiâs counsel, Jones Day partner Yaakov Roth, on whether it should allow a lower court ruling giving the go-ahead to Klashiâs election markets.
During the over two-and-a-half-hour hearing, the three-judge panel often interjected on Schwartz and Rothâs arguments to ask clarifying questions and pin down specific definitions, saying they didnât understand some arguments.
A large part of the hearing was around why the CFTC thinks betting on elections is different from other types of betting and how it interprets âthe contest of othersâ â a phrase the agency uses to define what gaming is.
âWeâre trying to figure whatâs in and out,â one judge said in a back-and-forth with Schwartz when trying to nail down the CFTCâs definition.
The panel judges also quizzed Kalshiâs lawyer, Roth, on the platformâs protections â at one point asking how it ensures its users arenât acting as âa front for a foreign government.â
They also drilled him on the definitions of gaming and gambling and where Kalshiâs products fit.Â
In his opening remarks, Schwartz said a DC district court judgeâs decision on Sept. 12 that opened the way to allowing Kalshi to list bets related to elections was âseriously flawed.â
âIf it goes into effect, [the decision] would let Klashi immediately open its futures exchange to high-stakes betting on the Congressional elections in November,â he added.
Judge Jia Cobb ruled that the CFTC overstepped its authority in halting Kalshiâs US election betting markets, which the agency appealed.
In the case â that Kalshi filed in November â the CFTC claimed that gambling on US elections could disrupt markets and threaten election integrity.
âThe harm to the public is going to be profound at a time, and I donât mean to be dramatic, but Americans broadly believe that our democracy is under threat,â the CFTCâs Schwartz said at the latest hearing.
Kalshiâs lawyer Roth argued the way to reduce the risk of market manipulation was to allow Kalshiâs betting platform as a âwhole suite of regulatory provisionsâ would apply to its product.
âRight now, this activity is happening and being reported to voters based on markets that are not regulated, that are open to foreign traders, that have no surveillance, thereâs no transparency,â he said.
The judges are expected to make a quick decision on the matter as the US elections are just 45 days away, slated for Nov. 5.
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