Posted on: December 9, 2024, 05:16h.
Last updated on: December 9, 2024, 05:16h.
Immediately after a federal appeals court in Washington D.C. denied a U.S. regulator’s bid to block prediction platform Kalshi from offering trading on the U.S. presidential election, the company transformed its futures exchange into “an online casino.”
That’s according to the latest court filing from the Commodities and Futures Trading Commission (CFTC). The agency regulates U.S. derivatives markets, which means it has the misfortune to also oversee Kalshi, whose activities it thoroughly dislikes.
Kalshi is regulated by the CFTC because the product it offers, events contracts, is a type of derivative that allows users to speculate on the outcome of a specific event. That might be anything from the closing price of a cryptocurrency or the outcome of the election – Kalshi is an Arabic word that means “everything.”
Kalshi Sues Regulator
In October 2022, the CFTC ordered Kalshi to cease offering events contracts on the outcome of elections because betting on political events is illegal in the U.S.
Kalshi sued its regulator last year, arguing that it was overreaching its authority. When a lower court judge sided with Kalshi in September, the CFTC quickly appealed.
The appeals court granted a temporary restraining order on the election contracts, pending arguments from both parties, but lifted the freeze just weeks before the election.
With the clock ticking down, this prompted Kalshi to show its true colors, according to the new court filing.
The company had argued that its election markets offer valuable insights into predicting political outcomes which can enable traders to hedge economic risks associated with politics. But its actions after the court decision shows it “has never been serious in that assertion,” the CFTC alleged.
‘Bet the Election’
CFTC lawyers wrote that “almost immediately” after the ruling, Kalshi erected a giant billboard on the Las Vegas strip, declaring that “Kalshi odds are LIVE” and inviting casino-goers to “Bet the election”
“It listed dozens of ‘Parlay Contracts,’ as though its futures exchange were a racetrack,” according to the filing. “Kalshi’s CEO bragged when Kalshi ‘lapped FanDuel in the App Store top 100,’ proclaiming that “[b]etting on politics is now more popular than betting on sports.”
The CFTC even suggests that Casino.org’s coverage of Kalshi highlights that the company offers a gambling product.
This case is less a battle between Kalshi and the CFTC than a struggle between Kalshi and the English language: ‘Transaction’ does not mean ‘transaction.’ ‘Contest’ does not mean ‘contest.’ And ‘gaming’ carries a definition that Kalshi just made up,’ the CFTC concluded.
Traders staked $132 million through Kalshi on the presidential election.
The CFTC is asking appeals court to overturn the lower court’s determination that “Kalshi’s congressional control contracts do not involve unlawful activity or gaming.”
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