US court approves election prediction markets

A U.S. federal appeals court has cleared the way for election prediction markets to operate, ruling against regulators' attempts to block them.

On October 2, the U.S. Court of Appeals for the District of Columbia Circuit ruled in favor of Kalshi, a derivatives exchange, allowing it to list contracts tied to the outcomes of U.S. elections.

This decision could open doors for other platforms, including Web3-based Polymarket, to expand their operations in the U.S.

The case centered on the Commodity Futures Trading Commission’s (CFTC) efforts to prevent Kalshi from offering political event contracts, which the regulator argued could violate state laws and the public interest.

The CFTC specifically opposed contracts predicting which political party would control Congress following the upcoming U.S. elections.

In response to the ruling, the CFTC sought to block Kalshi from offering these contracts until the appeal was decided.

However, the court rejected the regulator’s request, stating, "The Commission cannot obtain a stay at this time because it has not demonstrated that it or the public will be irreparably harmed while its appeal is heard."

Kalshi’s battle with the CFTC dates back to 2023 when the exchange filed a lawsuit challenging the CFTC’s decision to bar it from listing political contracts.

The appeals court’s decision upheld Kalshi’s argument that if the contracts comply with U.S. financial regulations, they should not be blocked based on broader concerns about public interest.

"This case is not about whether the Court likes Kalshi’s product or thinks trading it is a good idea," the judge stated in the ruling.

The decision now paves the way for election prediction markets, which could attract significant interest ahead of the U.S. presidential election.