US Election Betting Again on Hold as CFTC Seeks to Block Kalshi

(Bloomberg) -- Americans seeking to bet on the outcome of the 2024 elections on a federally regulated derivatives exchange have again hit a roadblock.

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A federal appeals court issued a freeze on trading on Kalshi Inc.’s political derivatives contracts late Thursday so that it could sort out a US government request to prevent the contracts from continuing to trade. Kalshi, which had only gone live with the election contracts earlier Thursday, suspended trading after the court’s ruling.

The US Court of Appeals for the DC Circuit could rule as soon as Monday on whether to let Kalshi resume trading or whether the contracts will be frozen pending further litigation — potentially through the November elections.

The Commodity Futures Trading Commission appealed a lower court’s decision that allowed Kalshi to let traders bet as much as $100 million on which political party will control the House and Senate after the elections.

The CFTC had previously blocked the New York-based startup from offering the contracts, saying it had the authority to prohibit exchanges from listing derivatives contracts involving “terrorism, assassination, war” and “gaming” if it believes they aren’t in the public interest. The district court judge had disagreed.

Spokespeople for Kalshi and the CFTC didn’t immediately respond to requests for comment.

“As trading commences on Kalshi’s election event contracts, even if only briefly, there is an acute risk of short-term manipulation of election markets and threats to election integrity,” the CFTC said in a filing seeking the stay pending appeal.

Kalshi’s lawyers said in a letter filed with the court that the arguments premised on undermining election integrity “are unsubstantiated and baseless” and noted that millions of dollars in election-betting trades already take place on unregulated markets.

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