Judge rules CFTC exceeded authority in blocking Kalshi’s election contracts

The U.S. Commodity Futures Trading Commission went beyond its statutory authority when it tried to block prediction market Kalshi's move to offer contracts tied to the U.S. 2024 election, a judge ruled. 

Kalshi's contracts do not involve "unlawful activity or gaming," said Judge Jia M. Cobb for the U.S. District Court for the District of Columbia, in an order posted on Thursday.

"This case is not about whether the Court likes Kalshi’s product or thinks trading it is a good idea," the judge said. "The Court’s only task is to determine what Congress did, not what it could do or should do. And Congress did not authorize the CFTC to conduct the public interest review it conducted here." 

The CFTC said last year that Kalshi could not offer contracts related to "congressional control contracts." Kalshi then sued the agency in November 2023.

Judge Cobb ruled in favor of the predictions market last week and tossed the CFTC's order blocking Kalshi from listing its congressional contracts for trading. Soon after, the CFTC filed a motion seeking an emergency stay of the judge's decision for at least two weeks while the agency works on an appeal.

The CFTC previously argued that Kalshi's election contracts involving gaming that was unlawful and "contrary to the public interest." 

However, Judge Cobb said on Thursday that the CFTC's use of the word gaming is too broad and said instead the term refers to "playing games or playing games for stakes." 

"The Court addresses, and rejects, that reading below, but it is difficult to understand how the CFTC settled on such an expansive definition of gaming (or gambling) given its position," Judge Cobb said.

The CFTC did not immediately respond to a request for comment. 

Rulemaking in process 

The CFTC has honed in on event contracts over the past year. Event markets, such as Kalshi, allow users to bet on the outcome of future events, including on the upcoming U.S. elections or even when certain Taylor Swift albums may be released. 

CFTC Chair Rostin Behnam has warned about a "significant uptick" in event contracts listed for trading on exchanges registered with the CFTC since 2021. The CFTC voted in May to propose rules banning bets on political events as those markets quickly expand ahead of November. 

"Allowing these contracts would push the CFTC, a financial market regulator, into a position far beyond its Congressional mandate and expertise. To be blunt, such contracts would put the CFTC in the role of an election cop," Behnam said in May.

Update: Sept. 12, 2:40 p.m. UTC to include details throughout