The fight over legal election betting in the U.S. looks to have swung considerably, and perhaps definitively, in favor of prediction markets.
On May 5 the Commodity Futures Trading Commission submitted a motion for voluntary dismissal to end its appeal against Kalshi, the New York-based exchange that has taken the sports betting industry by storm. The case was being heard by the U.S. Court of Appeals for the DC Circuit, and the motion was approved a day later.
As part of the dismissal, Kalshi also “waives any and all claims relating to or arising from litigation of this matter before this court, the district court, or administrative proceedings before the Commission.”
“Election markets are here to stay,” Kalshi CEO Tarek Mansour posted on X. “Prediction markets have been banned, censored, limited and pushed out for decades. This win solidifies their right to exist and thrive.”
The request for dismissal ends the legal arguments between Kalshi and the CFTC. The pair had long fought under the Biden administration but stopped when President Donald Trump took office in January. Kalshi originally self-certified its election contracts in June 2023 and the CFTC disallowed them in September that year.
That kicked off a federal court battle in which the markets were pulled and then ultimately greenlit last October when the appeals court ruled in favor of Kalshi. The platform and others then saw billions of dollars in trading volume on election contracts in the November cycle. At the time, the CFTC vowed to continue its fight, but that course has now been reversed.
In the court’s October ruling, Judge Patricia Millett conceded that the case was “close and difficult.” Ultimately, though, the three-judge panel found that the CFTC had failed to demonstrate how the election contracts would result in public harm, which was part of its argument for disallowing them. This failure was “fatal to the Commission’s stay request,” Millett wrote.
Until this year, the CFTC had staunchly enforced its prohibitions on contracts involving elections or gaming. But Kalshi has so far successfully maintained that prediction markets are financial exchanges with real economic hedging benefits. The platforms allow users to buy and trade contracts tied to event outcomes, much like traditional commodities exchanges but greatly expanded.
The appeals court ruling mixed with a correct prediction of Trump’s landslide victory signaled that the tide could be turning. A week before Trump took office, his son Donald Trump Jr. was named as an adviser to Kalshi. Trump Jr said in an X post that “my family and close friends used the prediction market Kalshi to know we won hours ahead of the fake news media. I immediately knew I had to contribute to their mission.”
On Feb. 12, Trump nominated Brian Quintenz, a Kalshi board member, as the next CFTC chair. Quintenz previously served as a commissioner during Trump’s first term and was outspoken in his support of prediction markets.
When the fight was just centered around election betting, the gaming industry was unmoved. However, when the exchanges began to expand into sports earlier this year, concern skyrocketed.
In response, the CFTC in early February announced its intention to host a roundtable on sports contracts. Few details were ever confirmed publicly, but comments opposing the markets have poured in to the CFTC site. Ultimately, the discussion planned for April 30 was abruptly canceled with no details of if or when it will be rescheduled.
In the meantime, numerous state gaming regulators have issued cease-and-desist orders against the markets, claiming they constitute illegal gambling. Kalshi has countersued in three states thus far – Nevada, New Jersey and Maryland – and has won preliminary injunctions in the first two. These rulings, mixed with the canceled roundtable and CFTC appointments, appear to suggest that sports markets could ultimately be approved, just as election betting now appears to be.
