U.S. Election Betting Delay Would Be 'Devastating' to Kalshi, Firm Says

Kalshi, the U.S. prediction market platform that just won a lawsuit against its regulator, said its future depends on being able to list election betting contracts while there's still time before Americans cast their votes on Nov. 5.

In a court filing Sunday, the New York-based company, which does business only in its home country, pushed back against the Commodity Futures Trading Commission's emergency motion to bar it from listing such contracts for another 14 days. The motion is "meritless," Kalshi said, and granting it would cause "irreparable harm" to the company.

"That delay—which the agency would assuredly try to parlay into another, then another, until it is too late—would be devastating for Kalshi, which has staked its future on this litigation and these markets," the company told the U.S. District Court for the District of Columbia.

Last year, the CFTC forbade Kalshi from listing contracts on which party would control each house of Congress after the election. Such contracts, the agency said, would amount to unlawful gaming and would be "contrary to the public interest." Kalshi then sued, calling the regulator's decision "arbitrary [and] capricious."

In a ruling handed down Friday, Judge Jia M. Cobb sided with Kalshi but did not give her rationale, which she said she would spell out in a subsequent opinion. She did not say when that opinion would be published.

Kalshi triumphantly declared on its website: "We did it! U.S. election markets are coming to Kalshi."

Hours later, the CFTC filed its emergency motion asking Cobb to stay her order for 14 days following publication of the opinion. Without knowing her reasoning, the agency said, it can't figure out whether it should appeal the decision.

If granted, the stay would mean Kalshi wouldn't be allowed to list election markets until late September at the earliest. The company, which settles trades in U.S. dollars, has been locked out of this year's election betting boom.

"The Commission lost, fair and square, on the law," Kalshi said in its Sunday filing. "It should not be allowed to snatch a procedural victory from the jaws of defeat by running out the clock."

Kalshi is the only CFTC-regulated prediction market in the U.S. It lists contracts on a variety of events, ranging from whether U.S. students' test scores will improve or worsen to how high bitcoin will rise this year. (To be clear: Trades are settled in dollars.)

PredictIt, an older U.S. site that also settles bets in fiat, lists election contracts under a narrow regulatory exemption. Polymarket, this year's breakout success story in both prediction markets and cryptocurrency, is barred from doing business with U.S. residents under a settlement with the CFTC.

Even so, PredictIt and Polymarket have been "accumulating market share at the expense of law-abiding Kalshi," the company told the court Sunday.

"[A]s Kalshi has waited for the litigation process to run its course, unregulated operations like Polymarket have taken advantage of that time to dominate the market," Kalshi said. "Further delays may make it impossible for Kalshi to meaningfully compete in this space."

In a filing Monday, the CFTC called this claim "questionable ... in light of Kalshi’s seemingly robust listing of hundreds of other non-political event contracts on its exchange."

Noting that the proposed election contracts would allow positions up to $100 million, the regulator reiterated its concern that "election gambling poses threats to election integrity and the perception of election integrity."

As for the accusation of stalling, the agency said requesting a stay is "a routine mechanism to allow the orderly administration of cases such as this one."

The CFTC said it believes Kalshi "may intend to list the election contracts imminently, without further self-certification (or, apparently, any notification to the court in its response to the CFTC’s motion or otherwise)." Self-certification is the process whereby entities regulated by the CFTC list products without the agency's prior approval.

"The public has already been denied these benefits for over a year, while the CFTC’s unlawful order was in place," Kalshi said Sunday. "And with the election now fewer than 60 days away, there has never been a more important time for those benefits to materialize."

Better Markets, a lobbying group that opposed Kalshi's plan, called the judge's Friday ruling in Kalshi's favor a "Dangerous Step Towards Allowing Gambling on U.S. Elections, Threatening Democracy and the Integrity of our Markets."

UPDATE (Sept. 9, 2024, 15:18 UTC): Adds CFTC's rebuttal.

UPDATE (Sept. 9, 2024, 15:57 UTC): Adds more details from rebuttal.