On Jan. 17, 2025, Kalshi and the Commodity Futures Trading Commission (CFTC) will have their second set of oral arguments over whether election contracts are legal.
Kalshi, a commercial prediction market platform, sued the CFTC in November 2023 to offer event contracts on election outcomes. The CFTC lost that case in September 2024.
In October 2024, the District Court lifted a stay that had prevented Kalshi from offering these contracts.
After the stay was dissolved, Kalshi launched its first election contracts, and the CFTC responded by filing an appeal in the D.C. Circuit Court. The Circuit Court opted for an accelerated timeline to resolve the question of election markets quickly.
A possible opinion, a friendlier administration
Oral arguments will occur three days before Donald Trump is inaugurated, and the court will issue a ruling after Trump returns to the White House.
Depending on the outcome, the Circuit Court’s opinion could mark the end of the lawsuit. If the CFTC assures the legality of election markets, then Kalshi could withdraw its case against the CFTC before the court reaches a decision. Alternatively, Kalshi could wait for the Circuit Court to rule, assuming a favorable decision for the company rather than its regulator.
Further, if the Circuit Court rules against Kalshi, Trump’s CFTC chair will be unlikely to appeal to the Supreme Court.
Trump’s administration is expected to be friendly to prediction markets. Elon Musk tweeted his support for prediction markets, and Trump’s secretaries of Commerce and Treasury have shown support for cryptocurrencies, an industry that has close ties to prediction market platforms. The Trump team reportedly viewed Kalshi’s odds on Election Night, and Kalshi’s executive team was photographed with Trump at UFC 309.
The Trump term could be a valuable time for the prediction market industry to not only grow but also build bipartisan support. Democrats could win the House of Representatives in 2026, and a Democratic administration could take over in 2028 or 2032.
The upcoming elections will provide opportunities for prediction markets to demonstrate their political neutrality and their ability to deliver accurate, unbiased insights on election outcomes, further challenging the CFTC’s criticisms.
