Federal Judge Issues Stay on Election Contracts Amid Kalshi and CFTC Battle

A federal judge in Washington DC, Judge Jia Cobb, issued a three-day administrative stay in response to a motion from the Commodity Futures Trading Commission (CFTC), which has been opposing Kalshi’s efforts to offer election-based event contracts. The delay will allow the court to hold a hearing on September 12, where both the CFTC and Kalshi will present their arguments.

Judge Overturns CFTC’s Block on Kalshi’s Election Contracts

The recent legal battle stems from the CFTC’s decision in 2023 to prevent Kalshi from listing contracts that let users bet on which political party would control Congress. Kalshi challenged the ruling, arguing that it was within its rights to offer such contracts under existing financial market regulations. 

On September 6, Judge Cobb overturned the CFTC’s block, clearing the path for Kalshi to list election contracts. However, the CFTC quickly filed an emergency motion to delay the implementation of the ruling, citing concerns over election integrity.

The CFTC has consistently maintained that betting on election outcomes poses a risk to both market integrity and public trust in the electoral process. The agency argued that allowing these contracts could influence voter behavior and potentially undermine confidence in the elections. 

In its emergency motion, the CFTC emphasized that such trades could be particularly harmful during a period when public faith in elections is already fragile, reported The Wall Street Journal. According to the regulator, even a brief period of allowing election contracts could lead to significant disruption in the markets and affect the perception of election legitimacy.

Tensions Rise as Kalshi Warns Delay Will Cause Significant Damage to Platform

Kalshi, on the other hand, contends that its election contracts are a legal and beneficial form of market speculation, similar to other event-based contracts that are already permitted. The company argues that these contracts offer valuable predictive insights and have the potential to provide economic hedging opportunities. 

Kalshi’s co-founder, Tarek Mansour, expressed frustration over the CFTC’s emergency motion, stating that delaying the listing would cause irreparable harm to the platform, which had placed its future on entering the election markets.

Several politicians have also weighed in on the issue. Some supporters of election betting have criticized the CFTC’s actions, calling for the regulator to allow the courts’ decision to stand. Among them, Senator Tommy Tuberville of Alabama urged the CFTC to stop delaying Kalshi’s market launch, arguing that legalized election markets are here to stay.

As the court prepares for its hearing, the future of election betting in US financial markets remains uncertain. For now, Kalshi and its supporters must wait to see if the court will allow the contracts to be listed before the upcoming elections.