The U.S. Commodity Futures Trading Commission has formally withdrawn its appeal of a federal court decision that permitted KalshiEX LLC, a New York-based derivatives trading platform, to list contracts allowing Americans to wager on the outcomes of U.S. elections. The agency submitted a motion in the U.S. Court of Appeals for the D.C. Circuit requesting a voluntary dismissal of the case, with both parties agreeing to bear their own legal costs. This move follows a vote by the CFTC’s commissioners, which reportedly resulted in a 3-0 decision to abandon the appeal, with one commissioner abstaining.
This decision marks a significant turning point in the regulation of prediction markets in the United States. Kalshi, which had originally requested CFTC approval in June 2023 to offer contracts tied to political control of the U.S. House and Senate, faced resistance from the Commission. The agency blocked the platform from listing the contracts, citing concerns over potential unlawful gambling and arguing that such products did not serve the public interest. In response, Kalshi filed a lawsuit, claiming the CFTC had acted beyond its legal authority.
In September, a federal judge in the D.C. District Court sided with Kalshi, stating that the Commission’s reasoning did not justify its prohibition. Although the CFTC immediately filed for an emergency stay and appealed the ruling, the D.C. Circuit declined to block Kalshi’s operations and affirmed that the Commission failed to demonstrate any concrete harm to the agency or the public interest. Oral arguments were heard again in January, but no final decision had been issued before the agency’s motion to drop the appeal.
Kalshi’s co-founder and CEO, Tarek Mansour, hailed the development as a historic moment, emphasizing the company’s commitment to regulatory compliance and its long-held belief in the legitimacy of its platform. He stated that the outcome confirmed the viability and future of prediction markets in the United States.
The CFTC’s decision to walk away from the appeal introduces a new chapter for financial instruments tied to political events, an area that has sparked debate among regulators and market participants alike. Critics argue that political event contracts could introduce gambling-like risks into the financial system, while proponents see them as legitimate tools for hedging political risk and improving market forecasting. With this latest development, Kalshi now has a clearer runway to expand its offerings and influence the evolution of regulated prediction markets in the U.S.
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