CFTC drops appeal in Kalshi election betting case, paving way for U.S. prediction markets

The U.S. Commodity Futures Trading Commission (CFTC) has dropped its appeal of a court decision that allowed prediction market operator KalshiEx to offer betting contracts on political elections, a move hailed by the firm as a landmark victory for the future of event-based trading in the United States.

In a filing to the U.S. Court of Appeals for the District of Columbia Circuit, the CFTC said the voluntary dismissal was reached on mutually agreed terms. As part of the agreement, Kalshi waived all legal claims related to the litigation, and both parties agreed to bear their own legal costs and attorney fees.

The case stems from a September ruling by U.S. District Judge Jia Cobb, who found that Congress had not granted the CFTC authority to conduct the public interest review it used to block Kalshi’s contracts on federal elections. The regulator had initially disallowed Kalshi’s self-certified election markets in 2023, sparking a lengthy legal battle.

CFTC’s decision to stand down was sharply criticized by financial reform advocacy group Better Markets. “The CFTC has just voluntarily surrendered its fight to overturn a dangerous lower court decision that allows gambling on the outcome of congressional elections,” said Stephen Hall, the group’s legal director. “That decision was bad law and even worse policy.”

Kalshi CEO Tarek Mansour, meanwhile, called the development a turning point. “Today is historic. We have always believed that doing things the right way, no matter how hard, no matter how painful, pays off,” he said in a statement. “Kalshi's approach has officially and definitively secured the future of prediction markets in America.”

Mansour posted on X: “Election markets are here to stay. Prediction markets have been banned, censored, limited and pushed out for decades. This win solidifies their right to exist and thrive.”

Kalshi’s current offerings include contracts on the outcomes of U.S. Senate races, gubernatorial primaries, and presidential nominations. The company has also expanded into sports markets, prompting additional scrutiny from state gaming regulators and the CFTC itself, which abruptly cancelled a planned roundtable on sports contracts last month.

The decision to abandon the appeal comes as the agency faces internal challenges. The CFTC confirmed it had placed certain employees on administrative leave over potential legal and ethical violations. “Investigations are currently ongoing into these matters,” the agency said.

The regulator’s evolving stance on prediction markets has stirred debate over its capacity to oversee a rapidly growing sector. “A ‘win’ for the CFTC would’ve been a headache, if not an obstacle, for an agency reassessing its views on prediction markets,” said Andrew Kim, a gaming attorney.

The legal backdrop to the dismissal has also attracted political attention. In January, Kalshi appointed Donald Trump Jr. as a strategic advisor. Weeks later, President Donald Trump nominated Kalshi board member Brian Quintenz, a former CFTC commissioner and vocal supporter of prediction markets, to lead the agency.

In an earlier ruling, DC Circuit Judge Patricia Millett described the case as “close and difficult,” but said the CFTC’s failure to demonstrate public harm from the contracts was “fatal to the Commission’s stay request.”