A U.S. federal appeals court has temporarily blocked Kalshi’s newly launched political prediction markets in response to an emergency stay request by the Commodity Futures Trading Commission (CFTC).
This comes after the CFTC lost a similar motion in a lower court, where Judge Jia Cobb of the District of Columbia ruled that the regulator overstepped its authority by banning Kalshi from listing markets on U.S. political outcomes, such as control of Congress or the presidency.
Kalshi, which challenged the CFTC’s ban, argued that the regulator’s decision was arbitrary and unfounded. Following Judge Cobb’s ruling, Kalshi quickly introduced its political markets, prompting the CFTC to request an emergency stay, citing concerns about the potential risks to election integrity and the possibility of market manipulation. The regulator also criticized Kalshi for launching the contracts before the agency had time to file its motion.
The CFTC’s appeal emphasized that political prediction markets could erode public trust in U.S. elections. In contrast, Kalshi’s legal team argued that no stay was needed, maintaining that the contracts were lawful and did not involve illegal gambling.
Kalshi also claimed that blocking the markets would financially harm the company and push traders toward unregulated alternatives like Polymarket, an offshore platform that has seen increased activity.
The appeals court has ordered a pause on Kalshi’s markets while it reviews the CFTC’s case. Kalshi has been directed to file a response by Friday, with the CFTC’s reply due by Saturday. Meanwhile, the CFTC is drafting a new rule that may ban political prediction markets in the U.S., citing similar concerns about election-related risks.
Judge Cobb, while acknowledging the CFTC’s concerns, found they were not central to her ruling in favor of Kalshi. She noted that clear evidence of harm would be required to justify halting the platform’s operations.
Kalshi’s case has sparked debate about the regulation of political prediction markets in the U.S., with potential implications for the future of political betting platforms.