A federal appeals court has delivered a major blow to prediction market operators, siding with regulators who want to keep betting on U.S. political outcomes off the table. The decision, issued on August 28, now sets the stage for a likely legal showdown at the Supreme Court.
The three-judge panel on the U.S. Court of Appeals for the D.C. Circuit ruled that the Commodity Futures Trading Commission (CFTC) acted within its authority when it ordered prediction market platforms to stop offering contracts based on political races. The case centered on Kalshi, a startup that had sought to operate a trading platform where users could bet on the results of U.S. elections.
Kalshi argued that its contracts were not gambling but instead valuable tools for gathering public opinion and generating forecasts. The CFTC disagreed, labeling such contracts as illegal gaming under federal law and issuing an order that effectively shut down U.S.-based political betting.
In its ruling, the appeals court found that the CFTC’s reading of the Commodity Exchange Act was reasonable and that the agency could lawfully bar election-related contracts. The panel concluded that allowing widespread betting on U.S. elections could undermine the integrity of the democratic process.
According to reporting from CNBC, the judges wrote that “the Commission’s interpretation of the statute is entitled to deference,” and that the CFTC “reasonably determined that contracts involving election outcomes are against the public interest.”
Following the decision, Kalshi signaled plans to take the fight to the Supreme Court. The company maintains that prediction markets offer valuable information and that the CFTC’s crackdown runs counter to free speech and informed decision-making.
In a statement after the ruling, Kalshi’s co-founder Luana Lopes Lara said, “We believe the court’s decision is wrong and we will be petitioning the Supreme Court to review this matter.”
The company contends that barring political prediction markets stifles innovation and restricts the public’s ability to gather data on likely election outcomes. Kalshi’s legal team has argued that the contracts at issue are not traditional gambling but regulated financial instruments that could improve market transparency.
The CFTC, for its part, has warned that allowing real-money betting on political races could open the door to manipulation or undermine voter confidence. The agency’s order applies to all U.S.-based platforms seeking to offer contracts tied to the results of elections for federal office.
CFTC Chair Rostin Behnam defended the commission’s approach, stating, “We have a responsibility to uphold the law and protect the integrity of American elections.”
With the appeals court ruling in hand, all eyes now turn to the Supreme Court. If the justices agree to hear the case, the battle could shape how federal agencies regulate both financial innovation and election-related activity for years to come.
Authorities have not publicly confirmed whether any other prediction market operators will join Kalshi’s appeal or if Congress will step in to clarify the legal status of political betting contracts. Investigators will need to determine how this precedent interacts with future developments in online trading and election law.
One thing is clear: the legal wrangling over political prediction markets is far from over. With the Supreme Court potentially on deck, the stakes for free markets and fair elections couldn’t be higher.
