Warning
of
an
imminent
“explosion
in
election
gambling,”
the
U.S.
Commodity
Futures
Trading
Commission
asked
an
appeals
court
to
extend
the
pause
on
Kalshi’s
political
prediction
markets
for
as
long
as
the
agency’s
appeal
is
pending.
“The
district
court’s
order
has
been
construed
by
Kalshi
and
others
as
open
season
for
election
gambling,”
the
CFTC
said
in
a
filing
Saturday,
referring
to
a
judge’s
Sept.
6
decision
that
the
regulator
shouldn’t
have
stopped
the
company
from
offering
contracts
on
which
party
will
control
each
house
of
Congress.
In
the
wake
of
that
decision,
the
agency
noted,
Wall
Street
heavyweight
Interactive
Brokers
announced
it
would
offer
contracts
on
the
presidential
election
through
a
CFTC-regulated
subsidiary.
Unless
the
U.S.
Appeals
Court
for
the
District
of
Columbia
extends
the
pause
on
Kalshi’s
contracts
for
the
appeal’s
duration,
other
CFTC-regulated
exchanges
will
follow
suit,
the
agency
said.
“An
explosion
in
election
gambling
on
U.S.
futures
exchanges
will
harm
the
public
interest.”
The
harms
include
market
manipulation
and
“damage
to
electoral
integrity,”
the
CFTC
reiterated.
Industry
repercussions
Separately,
the
CFTC
has
proposed
to
ban
election
contracts
at
all
exchanges
on
its
watch.
Several
legal
experts
said
the
district
court’s
opinion
could
torpedo
that
proposal.
The
district
court’s
opinion
also
has
potential
ramifications
for
cryptocurrency
businesses.
The
opinion
relied
on
the
Supreme
Court’s
Loper
Bright
ruling,
which
curtailed
regulators’
power
to
interpret
their
statutory
authority,
shifting
such
power
to
the
courts.
“It’s
likely
that
federal
agencies
will
continue
to
see
their
authority
curtailed
as
a
result
of
the
Lopper
Bright
ruling
and
in
the
absence
of
new,
clearer
legislation
from
Congress,”
wrote
Alex
Thorn,
head
of
firmwide
research
at
crypto
investment
bank
Galaxy
Digital,
in
a
research
note
Friday.
“This
could
have
wide
implications
for
the
crypto
industry.”
A
long-running
fight
Kalshi
filed
to
list
election
markets
last
year.
The
CFTC
blocked
it.
The
company
sued
and
won
last
week.
The
CFTC
filed
for
an
emergency
stay
blocking
Kalshi
from
immediately
listing
its
contracts,
but
lost
that
fight
too.
The
contracts
went
live
Thursday,
before
being
temporarily
suspended
by
the
D.C.
Appeals
Court
while
it
considers
the
emergency
stay.
Kalshi
offers
hundreds
of
other
event
contracts,
the
agency
noted,
and
“[i]f
it
prevails
on
appeal,
it
can
list
election
contracts
into
the
foreseeable
future
and
make
up
its
losses.”
Besides,
Kalshi
should
seen
this
fight
coming,
the
CFTC
said.
“Kalshi’s
sunk
costs
are
not
attributable
to
a
stay,
they
are
attributable
to
Kalshi’s
decision
to
spend
big
on
election
gambling,
knowing
that
the
Commission
disapproved
such
contracts
in
the
past.”
Ask
permission
or
beg
forgiveness?
Kalshi,
which
does
business
only
in
the
U.S.,
in
dollars,
has
complained
that
while
it
was
locked
out
of
this
year’s
election
betting
action,
Polymarket,
a
crypto-based
competitor,
logged
massive
trading
volumes.
“We
are
the
ones
who
were
trying
to
comply
with
the
law,
and
the
beneficiaries
of
the
delay
are
the
actors
who
don’t
want
to
comply
with
the
law,”
Yaakov
Roth
of
Jones
Day,
Kalshi’s
lead
attorney,
said
at
a
hearing
Thursday.
In
Saturday’s
filing,
the
CFTC
called
that
argument
“sophomoric.”
“A
pharmacy
does
not
get
to
dispense
cocaine
just
because
it
is
sold
on
the
black
market,”
the
agency
said.