US Prediction Market Kalshi Triumphs Over CFTC in Historic Ruling

In a landmark decision, a judge ruled late on Friday in favor of US-based predictions market Kalshi. The ruling overturned the Commodity Futures Trading Commission's (CFTC) previous decision and legally permitted the platform to offer derivatives for betting on the upcoming US election in November without the need for VPNs or other circumvention tools.

Potential Implications of the Ruling

This ruling could have significant implications. The CFTC, a US commodity regulator, had previously prohibited Kalshi from listing Congressional control contracts. The regulator argued that these contracts would constitute illegal gaming and would be against public interest. Kalshi responded by filing a lawsuit, describing the regulator's decision as "arbitrary and capricious."

Judge Jia M. Cobb's Ruling

Fast forward to Friday, Judge Jia M. Cobb of the U.S. District Court of the District of Columbia ruled in favor of Kalshi. She stated that the court would grant the plaintiff's motion for summary judgment and deny the defendant's cross motion for summary judgment. As a result, the CFTC's order from September 22, 2023, which prohibited Kalshi from listing its congressional control contracts for trading, was vacated.

Reactions to the Ruling

In response to the ruling, Kalshi CEO Tarek Mansour expressed delight, stating that "election markets are now legal in the United States for the first time in 100 years." Jake Chervinsky, the Chief Legal Officer at Variant Fund, described the ruling as a “HUGE win” for Kalshi. However, he stated that he would like to see the judicial opinion first. Nick Tomaino, founder of the crypto fund 1confirmation, said that this is “great news for anyone who believes that having skin in the game is a fundamental aspect of being American.”

Future Considerations and Developments

Despite the ruling, the issue may not be entirely resolved. The CFTC is considering a proposed rule to prohibit any entities it regulates from offering contracts on political contests. This is partly due to concerns that such contracts could undermine the integrity of elections. In other developments, Kalshi launched prediction contracts for its clients on March 18, enabling bets on Bitcoin and Ether price movements. Other contracts include a prediction on how high Bitcoin will reach in 2024 and one on the daily BTC price.

Impact on the Crypto Industry

This ruling is not only significant for Kalshi but also for the wider crypto industry. The success of this year's prediction market, Polymarket, which runs on crypto rails and is riding high on election betting excitement, demonstrates this. However, it remains unclear how many of its clients are US-based and whether that constitutes a violation of its own January 2022 CFTC settlement, which prohibited the company from operating in the US.

Significance of the Ruling

The ruling effectively makes Kalshi the only legal and legitimate online betting market available to US residents and citizens. More broadly, it represents a victory for advocates of prediction markets. These markets, popular in crypto circles, allow traders to bet on the outcomes of real-world events ranging from elections to album sales to temperature increases. While Kalshi does not use cryptocurrency, the crypto industry has been closely following the case.

Bottom Line

This ruling is undoubtedly a significant development in the world of online betting and prediction markets. It not only impacts Kalshi but also has broader implications for the crypto industry and the concept of prediction markets. What are your thoughts on this development? Do you think this ruling will have a lasting impact on the industry? Share this article with your friends and join the discussion. Don't forget to sign up for the Daily Briefing, which is available every day at 6pm.