Posted on: September 25, 2023, 01:56h.
Last updated on: September 25, 2023, 01:56h.
Federal regulators have closed the door on a Congressional betting market, but the fight is likely to continue in federal court.
The Commodity Futures Trading Commission on Friday announced that it was rejecting a proposal from KalshiEX LLC to offer a political event contract based on which party controls Congress.
“After reviewing the complete record, the CFTC determined the contracts involve gaming and activity that is unlawful under state law and are contrary to the public interest,” the agency said in a statement announcing the decision.
Kalshi allows traders to bet on the outcome of a variety of events in politics, pop culture, or the economy.
In June, Kalshi sought CFTC approval of its congressional contract, after failing to win the agency’s blessing for a similar market last year.
The disapproval announced Friday is a setback for Kalshi, but it is likely not the end of the road.
Court Challenge Possible
Kalshi is evaluating its next steps and has not announced its plans. But a likely next move would be to file a lawsuit attempting to overturn the CFTC’s decision.
In a series of social media posts following the CFTC’s announcement, Kalshi CEO Tarek Mansour said the decision was “arbitrary and capricious,” hinting at an argument the company likely would make in upcoming litigation.
Federal law requires agencies like the CFTC to make well reasoned decisions supported by evidence. Convincing a judge that the agency acted arbitrarily would be key to Kalshi’s legal strategy.
“We are evaluating options and are considering what the best course of action is,” Mansour wrote. “We believe we are right and are considering what it will take to make the government see what we see.”
For now, Kalshi is not offering a congressional elections contract on its platform, but other markets remain active. Contracts were being traded on events including the end of the Hollywood writer’s strike and the next federal interest rate, among others.
Given the growing likelihood that Congress is unable to pass an appropriations bill to keep the government open past Sept. 30, when current funding expires, Kalshi has expanded its markets related to the risk of a shutdown.
Political betting is also currently available through PredictIt – an avenue Mansour himself recommended.
PredictIt has been engaged in its own face-off with the CFTC, but it has so far been successful in challenging the agency in court.
New contracts have been appearing on PredictIt in recent weeks, signs of the site’s confidence following the recent court victories.
PredictIt had 20 active markets as of Monday, including the winner of this year’s Kentucky governor’s race, and next year’s GOP presidential primary in New Hampshire. On the congressional front, the site is offering contracts tied to the Arizona and Ohio Senate races as well as the question of whether New York Democratic Rep. Alexandria Ocasio-Cortez files to run for president next year.
Notably, PredictIt is not taking bets on which party will control the House or Senate, the subject of Kalshi’s CFTC denial.