In its Oct. 16 filing with the appeals court in Washington, D.C., the CFTC argued that the district court judge failed to comply with the Commodity Exchange Act (CEA) and prevented the regulator from properly reviewing certain transactions.

It was emphasized that the court ignored important details when evaluating Kalshi’s request to list his political activity contracts.

Kalshi filed a lawsuit against the CFTC in November 2023, seeking to overturn a decision aimed at banning political activity conventions.

Such contracts offer investors the opportunity to bet on the outcomes of certain political events. The CFTC had opposed Kalshi’s listing of these contracts because it considered such contracts to be gambling.

However, in Kalshi’s lawsuit, a Washington, D.C. federal court ruled in favor of Kalshi in September, ruling that the CFTC could not block the platform from listing political event engagements.

Following this decision, the CFTC appealed on September 6 and requested an “emergency stay” to stop Kalshi from listing political contracts. The CFTC appealed the federal court’s ruling, claiming it misinterpreted regulations that barred it from listing contracts.

However, on October 2, the District of Columbia Court of Appeals denied the CFTC’s request for an emergency stay. On October 7, Kalshi began legally listing betting markets containing US election odds.

The CFTC considers Kalshi’s attempt to list election possibilities “incorrect at every stage” and argues that such contracts fall into the category of gambling rather than financial products.

The regulator claims that Kalshi’s betting on political events contravenes the definition of a “gaming” or “event-oriented” contract under the CEA. In the latest documents submitted by the CFTC, it was stated that Kalshi found the listing of these contracts equivalent to gambling.

Kalshi prevailed against the CFTC and began listing many election-related betting contracts, such as the results of the US presidential election, which candidate would win the popular vote, which state would win by the narrowest margin, and more.

However, the CFTC warned Kalshi that it intended to expand the political betting market and announced that contracts drawing parallels with terms used in sports betting, such as “multiple bets”, would be forthcoming. The regulator argues that these contracts amount to gambling rather than financial investment products and should be banned in the US.

The outcome of the case still remains uncertain. On October 11, the judge overseeing the case granted the CFTC’s request to expedite the final decision on the appeal.

The deadline for the CFTC to submit its final pleadings is set for December 6, one month after the election. In this process, whether Kalshi will continue to list political activity contracts will depend on the final decision of the court.

On the other hand, while Kalshi was dealing with the case, other betting platforms like Polymarket made huge profits. While Polymarket has gained a significant advantage in the ongoing legal proceedings, racking up billions of dollars in betting volume, Kalshi’s future performance will depend on the final decision against the CFTC.