A U.S. federal appeals court ruled on October 2 to allow derivatives exchange Kalshi to list event contracts tied to U.S. election results. The ruling paves the way for election prediction markets to operate in the United States, including ones that Web3 platforms like Polymarket may benefit from.

In an Oct. 2 ruling, the U.S. Court of Appeals for the District of Columbia Circuit rejected an action by the Commodity Futures Trading Commission (CFTC) seeking to block Kalshi from listing derivatives contracts tied to the outcome of the U.S. election. As of October 2, about $1 billion was bet on the platform on the outcome of November's U.S. presidential election, according to the Polymarket website.

In September 2023, Kalshi won a lawsuit against the CFTC seeking to overturn a CFTC order barring Kalshi from listing contracts related to political events. The CFTC noted in the order that the contracts "involved gambling, were unlawful under state law, and were contrary to the public interest." Specifically, the CFTC noted that the contracts involved concerns about which party would control Congress after the U.S. federal elections in November. bet.

According to the CFTC, these contracts include “binary contracts that provide a cash settlement to the question: Will party X become the controller of department X?”

On September 12, 2024, the CFTC appealed the court’s decision and sought an injunction from the court to prohibit Kalshi from listing any related event contracts pending the outcome of the appeal. If approved, the ban would prevent all political event contracts from being traded ahead of the U.S. presidential election.

However, the judge said in the Oct. 2 ruling: "The Commission cannot obtain a temporary injunction at this time because it cannot prove that it or the public will suffer irreparable harm during the period of appeal." A previous Federal Circuit Court ruling in September upheld A similar view holds that the CFTC's actions to block the Kalshi contracts are beyond the scope of the public interest, especially when these contracts already comply with US financial regulations.

However, the judge emphasized in his ruling:

"This case is not about whether the court recognized Kalshi's product or whether it thought trading it was a good idea."

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