Amid the prediction markets’ growing popularity, the United States regulator US Commodity Futures Trading Commission (CFTC) has swiftly filed an emergency motion to prevent  Kalshi, a domestic prediction market platform, from offering contracts based on election outcomes. This action follows closely on the heels of a recent court ruling overturning a prior order suspending Kalshi’s election markets.

The CFTC has urgently sought a temporary halt to the recent court ruling that overturned an earlier decision barring Kalshi from offering election contracts for trading. This move likely stems from concerns about the potential impact of election-related contracts on market stability and the integrity of the electoral process.

On the same day that District Judge Jia Cobb ruled in favor of Kalshi, allowing it to offer contracts on political events, the CFTC filed a motion. These contracts are likely to include bets on the November US presidential election which the CFTC wants to stop from happening.

CFTC Seeks Court’s Detailed Reasoning For Further Steps

 The regulator asked the court to temporarily delay the implementation of its previous decision  (stay vacatur)  for 14 days, till the court provides a detailed explanation for denying the regulator’s request.

The CFTC stated that it needs to understand the court’s reasoning behind its decision before it can decide whether to appeal or request a temporary pause on the decision while it prepares its appeal.

The CFTC emphasized the urgency of the situation, stating that Kalshi is likely to immediately offer election contracts for trading as soon as the court’s decision is implemented.

As the CFTC expressed concern, Kalshi promptly announced on its website, ‘Election Markets are Coming to Kalshi!’ mirroring the regulator’s fears.

The CFTC banned Kalshi from offering contracts related to Congressional control last year, arguing that they constituted illegal gambling and were harmful to the public interest. Kalshi responded by filing a lawsuit, challenging the CFTC’s decision as arbitrary and capricious.

What the Advocates of Predictions Market Say

Prediction market enthusiasts are celebrating the recent court ruling in favor of Kalshi. Jack Chevinsky, chief legal officer of Variant Fund, described the decision as a “HUGE win” in a September 7th X post, although he expressed a desire to review the court’s opinion in detail.

In his post, Chervinsky stated, ‘While I’m hesitant to declare victory over regulatory overreach until I’ve fully examined the court’s reasoning, this case further demonstrates that aggressive legal action is the most effective way to address excessive government regulation.

Prediction Market In Crypto Landscape

Prediction markets are widely used in the cryptocurrency community. While Kalshi does not utilize cryptocurrency, other platforms like Polymarket operate on blockchain technology and offer crypto-based prediction markets, including those related to elections. In August, Polymarket experienced a record-breaking trading volume of over $470 million, primarily driven by election contracts, according to data from Dune Analytics.

Despite being prohibited from serving US residents due to a regulatory settlement with the CFTC, Polymarket is benefiting from the excitement surrounding the US election. Bets on Polymarket are recorded as smart contracts on a blockchain and settled using USDC, a stablecoin that is pegged to the US dollar.

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