Kalshi briefly offered US election betting last Thursday before the DC Circuit Court of Appeals continued an injunction against the company.
The motion to continue the stay was granted just hours after the DC Circuit Court ruled Kalshi could allow election betting on its exchange. Kalshi offers prediction markets for trading event contracts, which in simpler teams means betting on multiple items like jobs numbers, federal rate cuts, Grammy nominations and US elections.
“This Court should have the opportunity to review the district court’s missteps in allowing this election gambling to take place,” the Commodity Futures Trading Commission said in a motion to support keeping the injunction.
The next step in the case comes Thursday. Both sides will have 15 minutes apiece at 2 pm before a panel of three Circuit judges.
Background of election betting suit
The CFTC told Kalshi it could not offer 2024 election betting in September 2023.
The contracts would be similar to unlawful gaming and be contrary to public interest, the CFTC argued. That is despite a public comment period that led to support from multiple academics involved in market behavior.
That was matched by public opposition, which included multiple members of Congress lodging their complaints.
Kalshi previously applied to offer election contracts in August 2022 but withdrew it just days before a decision was expected.
Chance of success down to definition?
The District Court did not think the CFTC had established a likelihood of success in the case. That is because the court “misconstrued” the meanings of “involve,” “gaming” and “unlawful activity.”
The CFTC says the court misconstrued the definition of gaming, for example, because it claimed there must be a game involved.
It also argues that election betting should be considered unlawful activity because betting on the election is cited in 22 state statues.
Election integrity at risk?
The CFTC also said public interest and irreparable injury favors the injunction.
For example, a fake poll that showed Kid Rock led an election over a senator moved the price on PredictIt, which is also in court over its exemption status the CFTC issued in 2014.
Polymarket, an offshore operator, saw “spectacular manipulation” attempted by traders betting heavily on Vice President Kamala Harris.
Also listed is an example from 2012 where one trader bet millions on Mitt Romney to become president, “likely to make the US presidential election seem closer than it was,” CFTC said.
