.svg)
The Commodity Futures Trading Commission (CFTC) has asked a federal court to dismiss its appeal of a ruling that cleared the way for betting on elections, as concerns mount over a similar expansion of sports event contracts.
A federal judge ruled last September in favor of Kalshi in a case seeking to invalidate the CFTC’s finding that election contracts were not permitted under federal law.
That ruling not only opened the door for trading on election markets in the lead-up to the 2024 presidential election, but also caused the CFTC to scrap a proposed rulemaking that would have imposed a tighter prohibition on contracts involving “gaming”, including sports event contracts.
Since then, multiple exchanges began offering sports event contracts beginning in December 2024 through the CFTC’s self-certification process.
Although the commission triggered a review of contracts offered by Crypto.com that has yet to receive an announced resolution, no review was conducted for sports event contracts offered by Kalshi or Robinhood, which offers contracts through a partnership with Kalshi.
On Monday (May 5), the CFTC filed a motion to voluntarily dismiss an appeal of the elections case ruling in the U.S. Court of Appeals for the District of Columbia Circuit, including a joint stipulation with Kalshi in which the parties agreed to pay their own legal costs and Kalshi waived future claims related to the litigation.
"Election markets are here to stay," said Kalshi CEO Tarek Mansour on social media. "Prediction markets have been banned, censored, limited, and pushed out for decades. This win solidifies their right to exist and thrive."
The exit from the elections lawsuit is the latest in a series of signs that the CFTC under the Trump administration is likely to take a favorable position on sports event contracts.
It comes just weeks after the commission cancelled a planned roundtable conversation on the expansion of prediction markets that was expected to feature a number of speakers arguing that the sports contracts should not be permitted.
The lawsuit was also fought largely under the administration of President Joe Biden, and the CFTC has undergone leadership changes under President Donald Trump, with acting chairman Caroline Pham on record as dissenting to the proposed CFTC rulemaking to restrict prediction markets.
In addition, Trump’s nominee to fill the leadership position permanently, Brian Quintenz, has supported the expansion of sports event contracts in his previous stint as a CFTC commissioner, and serves as a member of Kalshi’s board of directors.
Trump’s son, Donald Trump Jr., was also brought on by Kalshi as a “strategic advisor” in January.
No new date for the policy roundtable has been scheduled and the CFTC has remained silent on any next steps.
Despite that, stakeholders in the regulated sports-betting space have continued to petition the commission to take action, including most recently the National Basketball Association (NBA), which became the second major professional sports league to weigh in, following comments from Major League Baseball (MLB) in March.
The NBA expressed similar concerns to MLB about the CFTC’s process potentially causing a risk to sports integrity that is more effectively mitigated in the state-regulated sports betting industry.
“While exchanges and brokers operate under the general auspices of the CFTC, that broad-based financial oversight does not include the kind of sports-specific controls and protections that are the hallmark of state sports gambling regulations,” wrote Alexandra Roth, the NBA's vice president and assistant general counsel for league governance and policy.
“The way new contracts come to market offers a stark contrast: exchanges can launch new, more exotic sports prediction markets via self-certification, which puts the burden of initiating any post-launch review on the CFTC and allows most contract markets to simply proceed unchecked.”
Several state gaming regulators, including the Pennsylvania Gaming Control Board, Michigan Gaming Control Board, Illinois Gaming Board, and Maryland Gaming Control Agency, have also submitted letters to the CFTC expressing concerns over the contracts.
“The unlicensed platforms that facilitate trading of these purported sports event contracts are circumventing state regulatory oversight to offer sports wagering in Illinois and nationwide,” wrote Marcus Fruchter, administrator of the Illinois Gaming Board, in a recent letter to the CFTC. “This activity is deeply disturbing.”
“It puts Illinois residents, and people across the United States, at risk by ignoring the carefully crafted statutory and regulatory protections developed in Illinois and other U.S. gaming jurisdictions, and it jeopardizes the critical tax revenue and other benefits derived from legal, state (and tribal) regulated sports wagering.”
The CFTC also issued a vague statement Monday saying that an undetermined number of staff had been placed on administrative leave for “potential violations of laws, government ethics requirements, and professional rules of conduct”.
The commission said the action was taken pursuant to executive orders from President Trump on lawful governance and accountability, and that investigations are ongoing, although it did not specify how many staffers had been placed on leave.
Better Markets, a non-partisan organization that promotes the public interest in financial markets, was critical of CFTC’s decision to abandon the elections case, calling the decision “bad law and even worse policy” that puts the CFTC in a position it lacks the resources to tackle.
“The CFTC is underfunded, under-staffed, and ill-equipped to police elections,” said Stephen Hall, legal director and securities specialist for the organization.
“Its focus should be on making sure the commodity markets work as intended so that Americans can pay stable prices for the commodities and goods they rely on in their everyday lives, from gas to groceries."
“To top it off, there was nothing to justify these threats since these election gambling contracts serve no legitimate financial purpose, such as hedging risk,” Hall said. “In a stark betrayal of the public interest, the CFTC has decided to give up the fight and turn its back on election integrity, the protection of countless investors, and the agency’s own ability to do the job Congress intended.”
