A federal appeals court in Washington has paved the way for the return of regulated political betting markets in the United States. The ruling, issued less than five weeks before Election Day, allows financial exchange startup Kalshi to resume offering fully regulated election-betting markets.
The three-judge panel lifted a temporary freeze on these markets, rejecting an emergency bid from the Commodity Futures Trading Commission (CFTC) to halt trading pending a full appeal. This decision enables Kalshi to once again offer trading on which party will control Congress next year, with potential expansion into other political contests, including the presidential election.
Kalshi CEO Tarek Mansour hailed the decision as “the dawn of a new era for financial markets.” The company’s platform allows for bets of up to $100 million on election outcomes, representing a significant shift from previous limitations on political gambling in the US.
The CFTC, which had opposed these markets, argues that they violate federal and state law and pose a threat to election integrity. CFTC Chair Rostin Behnam expressed concerns about potential market manipulation by wealthy traders and the agency’s uncomfortable position as an “election cop.”
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While the court acknowledged the CFTC’s concerns, it determined that the agency failed to demonstrate irreparable harm that would result from allowing these markets to operate during the appeal process. Judge Patricia Millett noted the importance of election integrity but stated that the CFTC had not provided a concrete basis for concluding that event contracts would likely cause such harm.
Critics of political betting markets, including financial watchdog group Better Markets and Senator Jeff Merkley (D-Ore.), have voiced strong opposition to the court’s decision. Merkley recently introduced legislation aimed at prohibiting financial firms from establishing political betting markets.
The ruling has broader implications for the financial industry, with brokerage giant Interactive Brokers planning to launch its own election-betting markets. The CFTC’s Division of Enforcement may find itself in a new role overseeing election integrity in financial markets.
While the court’s decision opens the door for political betting in the short term, it also leaves room for the CFTC to present a stronger case for harm in the future, meaning we could see more legal battles in this emerging field.
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