The Commodity Futures Trading Commission has urged the Sixth Circuit Court of Appeals to affirm that federal law gives the agency jurisdiction over prediction markets, a move that could decide the fate of Kalshi’s effort to offer event-based contracts. The filing comes in an ongoing legal fight between the regulator and the prediction-market platform, which wants to list bets on political outcomes. At stake is whether the CFTC can block Kalshi from selling contracts that critics say amount to gambling on elections.
The dispute’s origins
Kalshi, a New York-based startup, allows users to trade contracts on binary events—yes or no questions like “Will the Fed raise rates by June?” The CFTC has long argued that some of these contracts, especially those tied to political contests, fall under its regulatory authority under the Commodity Exchange Act. In 2023, the agency denied Kalshi’s request to list contracts on U.S. congressional control, saying they resembled illegal gaming. Kalshi sued, claiming the CFTC overstepped its mandate. The case landed in the Sixth Circuit after a district court sided with the commission in part.
What the CFTC told the appeals court
In its brief filed earlier this month, the CFTC’s legal team argued that Congress gave the agency broad power to police “any transaction that is not otherwise subject to the jurisdiction of the Commodity Exchange Act.” That language, they say, covers prediction markets because the contracts are tied to future events and involve risk transfer. The commission pointed to past enforcement actions against similar platforms, including one that let users bet on the outcome of the 2020 presidential election. “The Commission’s authority over these contracts is clear,” the filing states. “Kalshi’s attempt to avoid oversight would undermine decades of market regulation.” The agency also warned that allowing unregulated prediction markets could open the door to manipulation and insider trading.
Kalshi’s counterargument
Kalshi has consistently maintained that its contracts are not futures or options as defined by the Commodity Exchange Act. The company describes them as simple yes-or-no wagers that function more like insurance or a binary option, not the kind of agricultural or energy derivatives the CFTC normally oversees. In earlier court filings, Kalshi argued that the CFTC’s interpretation would give it a “blank check” to regulate any contract involving a prediction, including sports betting or weather forecasts. The company also noted that Congress explicitly legalized sports betting in 2018 and left prediction markets to state regulators, not the CFTC.
Why this case matters beyond Kalshi
Prediction markets have attracted growing interest from traders and tech investors who see them as a way to hedge against political and economic uncertainty. Platforms like Polymarket and PredictIt have gained traction, but they often operate in a legal gray area. A ruling from the Sixth Circuit could set a precedent for how—or whether—these markets can exist in the U.S. The CFTC under Chairman Rostin Behnam has taken a tough line, arguing that unregulated event contracts risk turning derivatives markets into casinos. Supporters of prediction markets counter that they provide valuable data and a way to aggregate public opinion more accurately than polls.
What happens next
The Sixth Circuit has not yet set a date for oral arguments, but the case is on a relatively fast track. Both sides have filed their main briefs, and reply briefs are due in the coming weeks. A decision is expected later this year. Until then, Kalshi cannot list the contested political contracts, and the CFTC continues to enforce what it calls a “temporary” ban on similar offerings. The outcome could determine whether prediction markets flourish under federal oversight or wither under regulatory pressure.
