CFTC Appeals Ruling on Election Contracts, Citing Risks to Democracy

The U.S. Commodity Futures Trading Commission (CFTC) is appealing a recent court ruling that allowed Kalshi, a prediction market platform, to offer contracts tied to U.S. elections. CFTC Chairman Rostin Behnam warned that such contracts pose risks to election integrity and financial markets.

Last Thursday, U.S. District Court Judge Jia M. Cobb ruled that the CFTC overstepped its authority in blocking Kalshi’s contracts. Behnam swiftly responded by stating, “This is against the law, and we will make that case.” The CFTC argues that Kalshi’s contracts constitute gaming, which are illegal in many states, and are contrary to the public interest.

Allowing election betting could undermine democracy, lead to manipulation, and compromise the integrity of the electoral process, as per Behnam.

Background on the Kalshi-CFTC Fiasco

Last year around this time, the CFTC blocked Kalshi from offering contracts tied to U.S. election outcomes. The agency classified Kalshi’s contracts as a form of gaming, noting that it is prohibited in numerous states.

In simpler terms, the CFTC believes that allowing people to bet on election outcomes would undermine the integrity of the democratic process. It could also lead to manipulation and false reporting.

“Betting or wagering on elections, as proposed by Kalshi, meets the definition of gaming. And in many states, betting or wagering on elections is prohibited by statute or common law. The analysis conducted, determinations reached, and process followed resulting in the Commission’s order are squarely within our duty and discretion,” the body said.

Following this move, Kalshi sued the CFTC, arguing that its contracts are devoid of any unlawful acts that are prohibited under the Commodity Exchange Act. The company further noted that the CFTC has no power to block them.

Kalshi claimed that its event contracts aren’t contrary to the public interest. Tarek Mansour, CEO of Kalshi, noted that access to tools for managing election risks has been limited to institutions and the wealthy, but their contracts aim to make these tools available to all Americans, thereby democratizing risk management.

Besides Kalshi, the CFTC has also been eyeing a crypto betting platform Polymarket. At a discussion at the Georgetown Psaros Center for Financial Markets and Policy, Behnam made his moves clear.

“We are observing any activity that’s occurring offshore and is providing exposure to U.S. customers and we want to make sure it is done legally and within the bounds of the law” he said.

Gairika holds positions in BTC. This article is provided for informational purposes only and should not be construed as financial advice. The Shib Magazine and The Shib Daily are the official media and publications of the Shiba Inu cryptocurrency project. Readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions.

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