In a surprising twist, the U.S. Commodity Futures Trading Commission (CFTC) has moved to withdraw its appeal against prediction market platform Kalshi, potentially greenlighting the company to offer political event contracts without further legal skirmishes. The motion, filed on May 5 in the U.S. Court of Appeals for the District of Columbia Circuit, suggests that the CFTC and Kalshi have reached an understanding, marking a pivotal moment for the burgeoning market of political betting.
Reversing Course: A New Era for Prediction Markets?
The CFTC’s decision to pull the plug on its appeal comes amidst a shifting regulatory landscape influenced by changes in political leadership. Acting CFTC chair Caroline Pham, appointed under President Donald Trump, appears to be steering the agency in a direction more favorable to prediction markets. This marks a significant departure from the CFTC’s previous stance, which cited concerns over potential market manipulation and threats to public interest. This regulatory shift echoes broader discussions in the U.S. Congress, which is bracing for an intense debate over crypto legislation this summer.
According to a joint filing, Kalshi has agreed to shoulder its own legal costs if the court approves the CFTC’s motion to dismiss. The company celebrated the development in a post on social media platform X, declaring that “election markets are here to stay.” This sentiment echoes past statements by CFTC Commissioner Summer Mersinger, who was appointed by former President Joe Biden and has publicly supported the legitimacy of election prediction markets.
The Road to Legal Clarity
Kalshi’s legal battles with the CFTC began in 2023 when the platform challenged a regulatory order to cease offering political event contracts. The company’s victory in a lower court last year prompted the CFTC’s subsequent appeal, which now appears likely to be abandoned. The platform’s emergence as a popular hub for political speculation, particularly during the 2024 U.S. election, has been bolstered by its embrace of cryptocurrency, including the acceptance of Bitcoin deposits.
The CFTC’s initial appeal raised alarms about the potential for “spectacular manipulation” within prediction markets, positing that such activities could undermine public confidence. However, with this recent motion to dismiss, the regulatory body seems to have softened its stance, possibly reflecting a broader recalibration under the current administration. This development parallels the ongoing calls from US crypto groups urging the SEC for clarity on staking, highlighting the industry’s demand for regulatory transparency.
Implications for the Crypto Community
For the cryptocurrency community, the CFTC’s retreat could signal a more accommodating regulatory environment for platforms operating at the intersection of finance, technology, and politics. Kalshi’s ability to offer political event contracts without the looming threat of legal action might encourage other platforms to explore similar markets, potentially driving innovation in how political events are monetized and traded.
Yet, questions remain about the long-term viability and ethical implications of such markets. Skeptics warn of the societal risks inherent in commoditizing electoral outcomes, raising concerns about the influence of speculative trading on democratic processes. As the market matures, regulatory bodies and industry participants alike will need to navigate these complexities to ensure fair and transparent operations.
In the coming months, all eyes will be on Kalshi and its competitors as they chart new paths in this evolving landscape. The CFTC’s withdrawal could be just the beginning of a broader transformation in how prediction markets are perceived and regulated, with potential ripple effects across the cryptocurrency sector. As the dust settles, one thing is clear: the conversation around the intersection of politics, finance, and technology is far from over.
Source
This article is based on: US regulator moves to drop appeal against Kalshi
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Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
