The Commodity Futures Trading Commission (CFTC) has ruled against Kalshi in the exchange firm’s bid to take bets on the outcome of the 2024 election.
Kalshi is a unique product insofar that it is not regulated under gambling legislation. Instead, it is federally regulated as a Designated Contract Market by the CFTC.
The company specializes in real-life events, and each time it adds a new contract it must submit to the CTFC the plan. Examples of such contracts include: “Will <variant> make up <percentage> of U.S. COVID-19 cases?” and “Will <nominee> win <award> at the Oscars?”.
Such markets on real-life events are often excluded from state-by-state sports betting catalogs. Betting on the Oscars, EMMYs and politics often are disallowed, with regulators citing integrity reasons.
Will <chamber of Congress> be controlled by <party> for <term>?
The CFTC published an order disapproving “congressional control political events contracts.” The notice reads: “The contracts would have been cash-settled, binary contracts based on the question: “Will <chamber of Congress> be controlled by <party> for <term>?
It continues: “After reviewing the complete record, the CFTC determined the contracts involve gaming and activity that is unlawful under state law and are contrary to the public interest, and therefore, pursuant to section 5c(c)(5)(C) of the Commodity Exchange Act (CEA) and CFTC Regulation 40.11, the contracts are prohibited and cannot be listed or made available for clearing or trading on or through Kalshi.”
The reason political markets considered so controversial in the United States, is general public policy based on concerns that it could influence voter behavior, encourage corruption and undermine the integrity of the election process.
Kalshi has also had to post an amendment, explaining how its contracts will be settled in case of a federal government shutdown. The company states in a letter to the CFTC: “In the case of a delay in data caused by a federal government shutdown impacting the reliability of the Source Agency, the market’s latest Expiration Date will be extended to the sooner of the release of the Underlying or six months after the end of the government shutdown.”
Contracts that could be affected include, but are not limited to: :
- Will the Consumer Price Index (“CPI”) increase more than <percent>?
- Will the price of food change by <above/below/between><percent> in <period>?
- Will there be an official recession in <period>?