According to CoinDesk, Kalshi, a U.S.-regulated prediction market platform, has won its federal lawsuit against the Commodity Futures Trading Commission (CFTC) regarding its plan to offer contracts on which party will control each house of Congress after the November election. This ruling allows Kalshi to participate in the election betting market in the final months before the election, although the CFTC may still appeal the decision.
The court's decision is seen as a significant victory for advocates of prediction markets, where traders bet on the outcomes of real-world events such as elections, album sales, and temperature changes. These markets are particularly popular within the cryptocurrency community, even though Kalshi does not use cryptocurrency. The crypto industry has been closely monitoring the case, with venture capital firm Paradigm filing a friend-of-the-court brief in support of Kalshi.
Last year, the CFTC had prohibited Kalshi from listing the congressional control contracts, arguing that they would constitute unlawful gaming and be contrary to the public interest. Kalshi challenged this decision in court, labeling it as arbitrary and capricious. Judge Jia M. Cobb of the U.S. District Court of the District of Columbia ruled in favor of Kalshi, granting their motion for summary judgment and vacating the CFTC's order.
Proponents of prediction markets argue that they are more effective than polls and pundits for forecasting events and gauging public sentiment, as participants are financially invested and thus motivated to conduct thorough research and express honest opinions. This year's breakout success in the prediction market, Polymarket, operates on cryptocurrency and has seen significant trading volume, particularly in election contracts. Despite being barred from doing business with U.S. residents under a regulatory settlement with the CFTC, Polymarket has logged over $450 million in volume, with the majority traded on election contracts.
Kalshi, in contrast, operates solely within the U.S. and settles trades in U.S. dollars. Every contract it lists requires approval from the CFTC, which led to the legal battle over the congressional control contract. Another potential conflict looms as the CFTC considers a proposed rule to prohibit entities it regulates from offering contracts on political contests, citing concerns that such contracts could undermine the integrity of elections.
