CFTC Drops Appeal, Clearing Way for Kalshi’s Political Betting

New York-based prediction market platform, by withdrawing its appeal over a ruling that permitted political betting contracts. This development represents a pivotal moment in the regulatory landscape for event-based trading in the United States.

In a Monday court filing with the U.S. Court of Appeals for the District of Columbia Circuit, the CFTC requested a voluntary dismissal of its appeal, an action approved by a 3–0 Commission vote with one abstention. As outlined in the agreement, each party will cover its own legal costs, and Kalshi will relinquish any potential claims related to the litigation. However, the dismissal is still awaiting final approval from the court.

“Today is historic. We have always believed that doing things the right way, no matter how hard, no matter how painful, pays off. This result is proof of that,” Kalshi CEO Tarek Mansour said in a statement. “Kalshi’s approach has officially and definitively secured the future of prediction markets in America.”

Kalshi’s Legal Struggle and Courtroom Victory

The dispute traces back to June 2023 when Kalshi requested approval to list contracts allowing bets on congressional party control. At that time, the CFTC—under then-Chair Rostin Behnam—denied the application, citing that such offerings amounted to unlawful gambling and posed a risk to the public interest.

In response, Kalshi filed a lawsuit, contending the agency had overreached its statutory limits. The case culminated in a September 2024 decision by U.S. District Judge Jia Cobb, who ruled in Kalshi’s favor. She stated that Congress had not authorized the CFTC to perform the kind of public interest assessment that served as the basis for its initial ban.

Despite the court ruling, the CFTC sought an emergency stay and later filed a formal appeal, maintaining its position that election betting could harm democratic processes and financial integrity. But that appeal has now been dropped, signaling a substantial retreat by the regulator.

A Shift in the Regulatory Climate

The CFTC’s retreat comes amid notable internal and external transformations. In recent months, the agency has seen leadership changes and a restructuring of its approach toward financial innovation. Acting Chair Caroline Pham has scaled back the agency’s expansive enforcement framework, reducing the number of crypto task forces and eliminating some previously issued guidance.

Kalshi’s growing presence in both political and non-political markets appears to have benefited from this more hands-off regulatory stance. The company currently offers contracts on Senate races, presidential contenders, and even non-political events like sports outcomes and tech product releases.

According to Kalshi executive Jack Such, the surge in interest suggests that “event contracts will become a trillion-dollar asset class,” pointing to the $200 million trading volume seen in March Madness basketball contracts as a sign of the market’s momentum.

Ongoing Controversy and Broader Implications

Despite Kalshi’s court victory and regulatory clearance, concerns persist. Advocacy group Better Markets sharply criticized the CFTC’s decision to abandon the appeal. “The CFTC has just voluntarily surrendered its fight to overturn a dangerous lower court decision that allows gambling on the outcome of congressional elections,” said Stephen Hall, the group’s legal director.

Others warn that permitting widespread election betting could introduce systemic risks. Gaming attorney Andrew Kim commented that a CFTC win may have only hindered the agency’s broader reassessment of how to handle prediction markets, stating that such a win “would’ve been a headache.”

The issue has also drawn political attention. In January, Kalshi appointed Donald Trump Jr. as a strategic advisor. Soon after, President Donald Trump nominated former CFTC Commissioner and current Kalshi board member Brian Quintenz to lead the agency.

At the same time, the CFTC has faced internal scrutiny, placing some employees on istrative leave amid investigations into legal and ethical issues, further highlighting the turbulence within the agency as it navigates a changing regulatory environment.

The Road Ahead for Prediction Markets

With the legal roadblocks now removed, Kalshi is positioned to expand its footprint across the U.S. prediction market space. But state regulators remain watchful. Nevada officials have raised concerns about the implications of election-related contracts, particularly given the state’s reliance on legalized gambling for significant revenue.

Still, the dismissal of the CFTC’s appeal may be seen as a green light for the broader acceptance of prediction markets in the financial ecosystem. As Mansour put it on X: “Election markets are here to stay. Prediction markets have been banned, censored, limited and pushed out for decades. This win solidifies their right to exist and thrive.”

Source:

CFTC Drops Appeal in Kalshi Election Betting Case, coindesk.com, May 6, 2025.