CFTC's request for 'temporary ban' rejected! Is the US appellate court giving the green light to predict the market?

The US Federal Court of Appeals ruled on October 2nd to allow derivative exchange Kalshi to list event contracts linked to US election results. This ruling paves the way for the operation of the election prediction market in the United States, which may benefit Web3 platforms such as Polymarket.

In its ruling on October 2nd, the United States Court of Appeals for the District of Columbia Circuit dismissed the Commodity Futures Trading Commission's (CFTC) attempt to prevent Kalshi from listing derivative contracts linked to the US election results. According to the Polymarket website, as of October 2nd, approximately $1 billion in funds were betting on the outcome of the November US presidential election on the platform.

In September 2023, Kalshi won a lawsuit against the CFTC aimed at overturning the CFTC's order to ban Kalshi from listing contracts related to political events. The CFTC stated in the order that these contracts "involve gambling, are illegal under state law, and are contrary to the public interest." The CFTC specifically pointed out that these contracts involve bets on which political party will control Congress after the November federal elections.

According to the CFTC, these contracts include "binary contracts for cash settlement on the question of whether a certain party will become the controller of a certain department

On September 12, 2024, the CFTC appealed the court's ruling and sought an injunction from the court to prohibit Kalshi from listing any related event contracts before the appeal result was announced. If this ban is approved, it will prevent all political contracts from being traded before the US presidential election.

However, in the ruling on October 2nd, the judge stated that "the committee cannot obtain a temporary injunction at this time because it cannot prove that it or the public will suffer irreparable harm during the appeal period." The previous September Federal Circuit Court ruling held a similar view, stating that the CFTC's actions in preventing the Kalshi contracts exceeded the scope of public interest, especially when these contracts were already in compliance with US financial regulations.

However, the judge emphasized in the ruling that:

This case is not about whether the court recognizes Kalshi's product or whether it considers trading the product to be a good idea