There is the latest development in the legal dispute between the U.S. Commodity Futures Trading Commission (CFTC) and prediction market platform Kalshi. The CFTC urged a panel of judges to consider an emergency motion filed by the CFTC seeking an emergency stay of a previous judge’s ruling that the CFTC lacked authority to ban Kalshi from listing prediction contracts related to the U.S. election. For his part, Kalshi argued that the CFTC’s view was too broad.
In a hearing Thursday, three judges on the U.S. Court of Appeals for the District of Columbia Circuit heard from both the CFTC and Kalshi on whether a previous district court ruling in Kalshi's favor should be upheld. A district judge earlier ruled that the CFTC's move to ban Kalshi's election contract "exceeded its authority."
"These are important issues, and the district court issued a deeply flawed decision that, if effective, would immediately open its futures exchange to high-stakes bets on the November election," said Rob Schwartz, CFTC's legal director. "
Event prediction market platforms like Kalshi allow users to bet on the outcome of future events, such as the U.S. election and when Taylor Swift’s album will be released. CFTC Chairman Rostin Behnam warned that since 2021, there has been a significant increase in the number of exchanges registered with the CFTC listing these event contracts for trading.
The CFTC and Kalshi have been locked in a legal battle since late last year after the CFTC said Kalshi was prohibited from offering contracts related to congressional elections. Then last week, Judge Jia M. Cobb of the U.S. District Court for the District of Columbia ruled that the CFTC "exceeded its authority" by not allowing Kalshi to list U.S. election-related contracts for trading. The CFTC then tried to get a stay of the judge's order during a hearing, called an Administrative Stay, a carefully scrutinized device used to freeze legal proceedings, in order to preserve the status quo, but was denied. The CFTC then quickly appealed to the circuit court.
Rob Schwartz, the CFTC’s legal director, said that if election contracts are allowed to be traded, it could harm the integrity and fairness of the election. “I don’t want to be too exaggerated, but we live in a world where tens of millions of Americans believe that the last presidential election was stolen. country. There was also an assassination attempt last week, the second in three months."
A large part of the discussion during the hearing was about why the CFTC considered betting on elections to be different from betting on other types of events.
The judge asked Rob Schwartz, the CFTC's legal director, how the CFTC defines gambling and "contests of others." Rob Schwartz says that an election, sporting event or awards ceremony is a "race to others."
The judge then asked whether other circumstances would constitute a contest, such as voting to decide who will be the next speaker of the U.S. House of Representatives. One judge also asked what the difference was between betting on elections and betting on other things.
Then it was Kalshi's turn to answer the judge's questions. Given that CFTC Chairman Rostin Behnam said that betting on elections meets the definition of gambling, the judge asked what constitutes gambling (gambling and gaming). Kalshi’s lawyer agreed with the examples cited by the judge, such as weather forecasting and purchasing hedging contracts, which are not gambling, but disagreed with the judge’s point about the Super Bowl and the platform provided by Kalshi being different from the former. Kalshi’s lawyer replied that , "Super Bowl" is a game.
A judge also asked Kalshi if there were protections in place to find out who was buying the contract. Kalshi’s lawyer responded that a “know your customer” (KYC) process has been implemented.
With the U.S. election approaching, circuit courts are expected to rule quickly.
〈CFTC urges appeals court to block Kalshi election betting transaction! Warning to affect the integrity of the election> This article was first published on "Block Guest".
