After winning a Sept. 12 District Court case to offer congressional control markets, Kalshi launched them, only to pause trading later that evening. The CFTC won an emergency stay from the D.C. Circuit Court to halt Kalshi’s election markets. The D.C. Circuit Court marks the second round of lawsuits in the battle between Kalshi and its regulator.
Kalshi argues that election markets are a natural extension of the logic behind its other event contracts. Traders can hedge against risks from other events, and elections are among the most consequential.
The CFTC has argued that election betting could undermine faith in American elections and harm election integrity. These regulatory concerns have driven the CFTC’s case against Kalshi since Nov. 2023.
Both sides’ attorneys are scheduled to argue before the D.C. Circuit Court on Sept. 19 at 2 p.m. ET.
Kalshi and the CFTC Differ on Definition of “Gaming”
The CFTC allows event contracts, but prohibits any contract “that involves, relates to, or references terrorism, assassination, war, gaming, or an activity that is unlawful under any State or Federal law.” One of the most contentious points of disagreement is the definition of gaming.
In its D.C. Circuit Court brief, Kalshi argued that “gaming” requires an actual game. “A contract thus involves ‘gaming’ if it is contingent on a game or a gamerelated [sic] event.” Since elections are “not staged for entertainment or for sport,” Kalshi argued that its congressional control markets couldn’t be construed as gambling.
Kalshi’s brief goes on to contrast its view directly with the CFTC’s. “Rather than ask whether a contract’s event involves ‘gaming,’ it [the CFTC] asks whether trading the contract amounts to ‘gaming.’”
Whether Kalshi is allowed to reopen its markets will hinge on the D.C. Circuit Court’s interpretation of “gaming” and “involve.” It’s a granular case that will test the limits of the CFTC’s claim to weigh its expertise in making decisions like whether to allow event contracts but prohibit election markets.
