Kalshi's New Political Prediction Markets Halted as CFTC Appeals Loss

A U.S. federal appeals court halted Kalshi's brand-new political prediction markets, heeding the Commodity Futures Trading Commission's request for an emergency stay after the regulator lost a similar motion to a lower-level judge.

Judge Jia Cobb of the District of Columbia court ruled last week that the CFTC exceeded its authority by banning Kalshi from listing U.S. political prediction markets, basically bets on which party might control the House of Representatives or win the White House in any given term. Kalshi, the plaintiff in the case, sued the CFTC, arguing the agency was behaving arbitrarily in banning these markets.

The CFTC initially asked Judge Cobb, who's overseeing the case, to still prevent Kalshi from listing any contracts while it waited for her full opinion, which she published Thursday morning. The judge denied the CFTC's request, and Kalshi listed its first U.S. political prediction markets in the afternoon. The CFTC filed an emergency motion to stay the markets to the appeals court while it considers whether to appeal the full ruling, court records showed Thursday.

Trading on Kalshi's two new contracts, asking which party will win the House and Senate, was paused as of 11:30 p.m. ET Thurday (03:30 UTC Friday), with a notice on Kalshi's website citing a "pending court process."

"Appellee KalshiEx LLC ('LLC'), knowing that this Court’s review was imminent, has raced to launch its election gambling contracts on the same day the District Court issued a memorandum opinion, before Appellant the Commodity Futures Trading Commission ('Commission' or 'CFTC') has had the opportunity to file this motion for stay pending appeal about the serious legal issues and public interests at stake," the CFTC said in its filing.

Kalshi wouldn't be harmed much if the appeals court temporarily halted its contracts, while the public interest may be harmed more if the contracts continued, the CFTC argued.

Kalshi's attorneys pushed back, saying "no administrative stay is necessary or appropriate."

"Kalshi will promptly oppose the CFTC’s renewed stay motion on the merits in this Court. But in the meantime, no administrative stay is necessary or appropriate. Judge Cobb’s decision on the merits was clearly correct because the statute empowers the CFTC to block event contracts only if they involve (as relevant here) 'gaming' or 'unlawful activity,'" the company's letter said. "As Judge Cobb observed, elections are neither."

The appeals court ordered Kalshi to halt its contracts while it considers the motion, and ordered Kalshi to file a response by Friday evening. The CFTC can file a reply by Saturday evening.

The CFTC is also in the middle of a rulemaking process to ban political prediction markets in general from the U.S., citing concerns about policing fraud in the underlying market – namely, elections.

Judge Cobb, in her Thursday opinion, said she was sympathetic to that reasoning but it was irrelevant to her assessment of the agency's case against Kalshi specifically.