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A federal appeals court has upheld a lower ruling that effectively permits wagering on U.S. elections, including the presidential race.
A three-judge panel on the U.S. Court of Appeals for the District of Columbia Circuit rejected a request by the U.S. Commodity Futures Trading Commission (CFTC) for a stay that would prevent event contracts exchange Kalshi from offering commodities based on election results.
The CFTC appealed a September 6 decision by the U.S. District Court in favor of Kalshi, and an administrative stay was put in place by the court a week later to allow the appeals court to consider an emergency motion by the CFTC.
That motion was argued on September 19, with each side differing on the impact that offering election markets would have on election integrity.
“In short, the concerns voiced by the Commission are understandable given the uncertain effects that Congressional Control Contracts will have on our elections, which are the very linchpin of our democracy,” the court wrote in its 15-page decision Wednesday (October 2). “But whether the statutory text allows the Commission to bar such event contracts is debatable, and the Commission has not substantiated that risks to election integrity are likely to materialize if Kalshi is allowed to operate its exchange during the pendency of this appeal.”
“At this point, in other words, the Commission has failed to make the essential showing of irreparable harm.”
The CFTC’s appeal will continue forward, but with the administrative stay being dissolved, Kalshi has posted a new market based on the result of the U.S. presidential election that is set to launch Thursday.
“We are incredibly honored to bring safe, regulated, and trusted election markets to the US,” Kalshi CEO Tarek Mansour told Politico. “This week is the dawn of a new era for financial markets.”
Other entities such as PredictIt or Polymarket have offered exchanges based on elections, but those are not under the jurisdiction of U.S. regulators.
Although election wagering is offered in other international jurisdictions, the issue has traditionally been a non-starter for U.S. gaming regulators, save for a brief moment in 2020 when the West Virginia Lottery allowed FanDuel to offer election markets — a moment that ended within about an hour after regulators received pressure from Governor Jim Justice and others to halt the practice.
“Every state in the nation was approached to have election wagering, and we all denied it,” said David Rebuck, former director of the New Jersey Division of Gaming Enforcement, during a webinar last month.
“The federal government was asleep at the switch and now you have election wagering that came into play under commodities trading, and now the federal government finds themselves saying, ‘oh my god we’ve got to stop this, now what are we going to do when we’re in court’.”
The decision has also come under fire from at least one federal lawmaker.
Oregon Senator Jeff Merkley introduced legislation in the Senate last month to prohibit commodity markets based on elections.
“When we reduce our democracy to a horse race for the ultra-rich and huge corporations to bet on, we demolish the integrity of our democratic process and put corporate profits over people,” he said in a statement Wednesday. “This ruling comes almost 30 days before one of the most consequential elections in our nation’s history and opens the door to this terrifying practice.”
“Allowing big wagers with the ability to put the thumb on the scale is like allowing bets on ballgames when you also control the umpire,” he continued. “It is corruption, plain and simple. And it is corruption aimed at the heart of our democracy.”
