The legal battle between Kalshi and the Commodity Futures Trading Commission (CFTC) is heating up again. On Oct. 11, the D.C. Circuit Court of Appeals granted an expedited trial schedule for the second round of the fight between Kalshi and the CFTC, as the regulator continues to try to crack down on election betting. The key dates include:
- Appellant’s Brief – Oct. 16, 2024
- Appellee’s Brief – Nov. 15, 2024
- Appellant’s Reply Brief – Dec. 6, 2024
The CFTC is the appellant and has already filed its brief. Kalshi is the appellee, following its victory in U.S. District Court on Sept. 6, when the company was granted summary judgment. This ruling avoided a full trial and marked Kalshi’s first legal win.
The remaining legal skirmishes overturned a stay preventing Kalshi’s election contracts from being traded. Kalshi finally launched its election contracts on Oct. 2, the same day the final stay was dissolved. The next day, Interactive Brokers announced they would launch their own election markets.
Oral arguments will be scheduled once Kalshi’s reply brief has been filed. Oral arguments may or may not be held before Inauguration Day on Jan. 20. That means a ruling may not arrive until after the next president is sworn in, by which time election contracts would have been paid out.
What's next?
When Kalshi won its district court case, it opened the door for other derivatives exchanges to offer election contracts. The CFTC leaned on the prohibition of contracts that “involve” gaming or elections that are carved out in its administrative rules. The district court and the circuit panel that heard oral arguments about the final stay found that Kalshi’s election contracts didn’t pose an immediate threat to elections or the public.
Many of the arguments will likely be the same arguments both sides have previously delivered. However, both Kalshi and the CFTC now have hard data about elections. This presents an opportunity for both sides to present new arguments to the D.C. Circuit Court in briefs and oral arguments.
When the D.C. Circuit Court denied the CFTC’s request for a stay, the judges ended by listing examples of evidence the CFTC could use to apply for a stay in the future, including “…political campaigns or their proxies encouraging supporters to purchase Congressional Control Contracts could constitute evidence that the contracts harm election integrity or that manipulation is underway.”
On Oct. 8, Musk tweeted that “betting markets [are] More accurate than polls, as actual money is on the line.” Throughout October 2024, Elon Musk tweeted screenshots of Polymarket and Kalshi prices moving in Donald Trump’s favor.
Making progress https://t.co/mbq042AKCg
— Elon Musk (@elonmusk) October 17, 2024
One possible ironic twist in the second round between Kalshi and the CFTC would be for one of the most vocal proponents of prediction markets to not only be used as CFTC evidence against election markets but also for the circuit court to rule against Kalshi following oral arguments.
