The U.S. Commodity Futures Trading Commission (CFTC) has officially dropped its appeal in its case against Kalshi, a New York-based prediction market platform. This decision, confirmed through a recent court filing, marks a significant milestone for political event contracts in the United States.
As part of the terms outlined in the motion for voluntary dismissal, which still requires court approval, both parties have agreed to bear their own legal expenses. Additionally, Kalshi has waived its right to pursue any litigation against the CFTC stemming from this dispute.
In a statement reflecting his optimism, Kalshi CEO Tarek Mansour said, “Today is historic. We have always believed that doing things the right way, no matter how hard, no matter how painful, pays off. This result is proof of that. Kalshi’s approach has officially and definitively secured the future of prediction markets in America.” This statement underscores the company’s commitment to navigating regulatory challenges with integrity.
The origins of Kalshi’s conflict with the CFTC trace back to 2023 when the commission denied the platform’s proposal to allow users to place wagers on which political party would control the chambers of Congress. At that time, the CFTC, then led by former Chair Rostin Behnam, contended that such contracts represented unlawful gaming and were “contrary to the public interest.”
In response, Kalshi filed a lawsuit in November 2023 against the CFTC in Washington, D.C. The lawsuit asserted that the CFTC had exceeded its regulatory authority by attempting to block the proposed political contracts and sought judicial relief to vacate the commission’s decision. By September 2024, a favorable ruling from the court permitted Kalshi to offer these political contracts.
Following its loss, the CFTC attempted to reverse the district judge’s decision by requesting a temporary stay on Kalshi’s operations—an appeal that was subsequently denied. The agency proceeded to file an appeal, reaffirming its earlier arguments against the legitimacy of the contracts.
However, as events unfolded, changes were evident within the CFTC’s leadership. Following the return of U.S. President Donald Trump to office, his son, Don Jr., joined Kalshi as a strategic advisor. In April, Rob Schwartz, the CFTC’s general counsel at the time of the initial appeal, left the agency, which contributed to a shift in the regulatory landscape.
Under acting Chair Caroline Pham, the CFTC has since revised its approach towards cryptocurrency regulations, eliminating several crypto-related advisories and condensing its enforcement resources to two task forces. This pivot signifies an effort to streamline regulatory practices as the crypto market continues to evolve.
In summary, the CFTC’s recent decision to abandon its appeal not only alters the trajectory for Kalshi but also signifies a broader acceptance of prediction markets in the American political sphere. Stakeholders will be closely watching how this development shapes the future of prediction markets and regulatory practices within the CFTC.
