On Thursday, prediction exchange Kalshi began issuing contracts—bets, effectively—on which major political party will win control of each half of the US Congress in the November election. However, it was forced to halt trading less than 24 hours later.
Kalshi is engaged in a legal battle with the Commodity Futures Trading Commission (CFTC) over whether such contracts are permissible. The stakes are high, and time is running out. If Kalshi’s markets aren’t open between now and November, it will miss a lucrative window of opportunity that won’t be repeated until 2028. However, the CFTC and other opponents of the idea argue that the risk of electoral interference is too great when there’s money directly riding on the outcome.
Technically speaking, Kalshi is an exchange, not a betting site. Rather than putting its own money up against that of players, Kalshi facilitates the exchange of futures contracts between traders. That puts it outside the realm of gambling, legally speaking, but within the purview of the CFTC, which oversees stock markets and other types of financial exchanges. Prediction contracts exist in various forms and allow businesses to hedge against risks, such as changes in policy or even bad weather.
Kalshi argues that election contracts fall under the same umbrella, as election outcomes can have a significant impact on certain areas of business. However, the CFTC issued an order in September putting a halt to those markets, classifying them as a form of “gaming,” which it prohibits.
Congressional Control Contracts Available for a Few Hours
Last week, the District Court of Columbia issued a summary judgment, overturning the September order. However, Judge Jia Cobb issued a temporary stay, preventing Kalshi from launching its markets until Thursday’s hearing.
Having obtained the go-ahead at that point, Kalshi began offering its contracts. Per the Associated Press, money was soon “rolling in.” However, the only propositions immediately available were on which party would control each half of Congress—the US House of Representatives and the Senate. Notably absent was a contract for the winner of the presidential race.
Those markets didn’t remain available for very long. On Friday morning, Bonus noted that trading had already been halted with the following message:
Trading is paused on elections.kalshi.com pending court process.
The CFTC appealed the District Court’s decision and obtained an administrative stay late Thursday, forcing Kalshi to suspend trading.
Kalshi has asked the court to ensure the stay is brief, as there is not enough time before the election for the appeals process to play out in full.
The CFTC is fighting a similar battle with PredictIt, though the specifics of that case are different. PredictIt had been offering political contracts for years with the CFTC’s blessing. However, the CFTC attempted to withdraw its permission in 2021. Although it didn’t provide a reason at the time, it has since explained that it believes PredictIt’s operations have exceeded the limited scope the CFTC initially approved.
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