In a landmark decision, a federal judge has ruled to let Americans use financial market instruments to bet on the outcome of U.S. elections, finding that the regulatory agency that blocked election betting overstepped its authority.
The decision deals a blow to the CFTC, which barred Kalshi from listing and clearing its cash-settled political event contracts due to concerns about unlawful gaming and other activities not in the public’s interest.
While the judge acknowledged the CFTC’s concern that allowing the public to trade on the outcome of elections could be contrary to the public interest, she found that the CFTC had exceeded its statutory authority in ordering Kalshi to shut down its election betting marketplace.
“Kalshi’s contracts do not involve unlawful activity or gaming. They involve elections, which are neither,” Cobb wrote in Thursday’s memorandum. “Although the court acknowledges the CFTC’s concern that allowing the public to trade on the outcome of elections threatens the public interest, this court has no occasion to consider that argument.
“This case is not about whether the court likes Kalshi’s product or thinks trading it is a good idea,” she continued. “The court’s only task is to determine what Congress did, not what it could do or should do. And Congress did not authorize the CFTC to conduct the public interest review it conducted here.”
Cobb’s memorandum was issued several days after she issued a preliminary ruling against the CFTC’s decision to bar Kalshi from offering elections derivatives contracts, but paused the matter until a hearing Thursday to consider the CFTC’s request for a delay in the case, which she denied.
“The court finds that Kalshi’s congressional control contracts do not involve activity that is unlawful under any federal or state law, nor do they involve gaming,” Cobb wrote. “Accordingly, the court must grant plaintiff’s motion for summary judgment.”
Kalshi’s betting website went live shortly after Thursday’s hearing, meaning that Americans can now legally place bets on elections in a regulated marketplace.
The CFTC did not respond to a request for comment on the ruling.
Kalshi CEO and co-founder Tarek Mansour took to social media to praise the decision and announce that the election betting marketplace is operational.
Cantrell Dumas, director of derivatives policy at Better Markets, a nonprofit that promotes public interest in financial markets, issued a critical response to Cobb’s preliminary ruling, which was upheld at the conclusion of Thursday’s hearing.
“If political event contracts are allowed, we could witness scenarios similar to what happened with GameStop or other meme stocks,“ Dumas said in the Sept. 10 statement. ”Just as social media movements and speculative traders turned the stock market into a frenzy, political betting could incentivize manipulation, disinformation campaigns, and wild speculation on election outcomes.
“The focus would no longer be on electing the best candidate or having the outcome reflect the will of the voters but on impacting the process so that the outcome is most profitable from winning or losing a bet,” he added.
