- CFTC cites past market manipulation in prediction markets as it seeks to halt Kalshi’s election market offerings.
- Kalshi claims a partial legal win, but election markets remain paused due to a stay order from the appeals court.
- The CFTC disputes Kalshi’s argument, warning of potential harm if election bets are allowed on regulated platforms.
The Commodity Futures Trading Commission (CFTC) has raised alarms over potential manipulation in US election prediction markets in its latest filing against Kalshi, a predictions platform. In its statement filed on September 14, the CFTC pointed to previous cases of manipulation on rival platforms as justification for its concerns.
Past Manipulation Incidents Highlighted
The CFTC highlighted recent incidents involving other prediction platforms. One notable example involved Polymarket, where traders allegedly tried to manipulate the market by betting on Kamala Harris to win the 2024 US presidential election. Another instance occurred on PredictIt, where a fabricated poll claiming Kid Rock was leading a Michigan Senate race caused a significant shift in the price of a contract tied to Senator Debbie Stabenow’s reelection.
Kalshi, which had recently launched election markets, has faced legal challenges from the CFTC over whether its operations fall under regulatory control. Although Kalshi won part of its case in early September, allowing it to temporarily offer election markets, a stay order has paused these offerings while the legal battle continues.
Legal Battle Intensifies
On September 6, Kalshi claimed a victory after District Court Judge Jia Cobb ruled that the CFTC had overstepped its authority in halting the platform’s election markets. However, the CFTC quickly filed for an appeal, and the case now moves to the appeals court, with a temporary stay halting Kalshi’s election market activity.
Kalshi’s defense argues that such a stay would cause significant financial harm to the company, especially as unregulated platforms continue to offer similar products. In response, the CFTC dismissed Kalshi’s claim as “sophomoric,” drawing a harsh analogy by comparing it to a pharmacy selling illegal drugs just because of their availability on the black market.
Future of Election Markets at Stake
A central issue in the case is whether Kalshi’s prediction market operations qualify as “gaming” under US law, which would place them under the CFTC’s jurisdiction. While Kalshi and its supporters argue that its platform provides valuable insights and engagement, the CFTC remains focused on preventing potential harm from allowing election betting on regulated platforms.
