Kalshi's Legal Tussle With CFTC Nears End as Regulator Drops Appeal

The U.S. Commodity Futures Trading Commission has signaled it will no longer appeal a court's decision to allow prediction markets platform Kalshi to accept bets on U.S. election outcomes—an about-face that bookends a long legal battle between the regulator and technology startup. 

The Commission filed on Monday a motion to voluntarily drop its appeal with the U.S. Court of Appeals for the District of Columbia. A CFTC representative told Reuters on Monday that the regulator decided to abandon its appeal following a vote on the matter. 

The CFTC did not immediately respond to Decrypt’s request for comment on the matter. 

“Election markets are here to stay,” Kalshi founder Tarek Mansour said late Monday in a social media post. “This win solidifies their right to exist and thrive.”

Kalshi and the CFTC have each agreed to pay the court and attorney fees they have incurred throughout the case, according to the filing.  

The Commission's move to close the book on its two-year-long legal battle with Kalshi comes as federal regulators scale back their oversight of technology firms under U.S. President Donald Trump.   

In February, President Trump selected pro-crypto regulator Brian Quintenz, a former digital assets policy lead at Andreessen Horowitz, to lead the Commission. If confirmed, he will take the reins from CFTC Acting Chairman Caroline Pham, whose ascent prompted a clearing out of the agency's most crypto-skeptic commissioners. Under Pham, the CFTC also announced a public roundtable to review the Commission's regulatory approach to prediction markets. 

Amid that pro-tech vibe shift, Kalshi has launched loads of elections-based markets and even embraced digital assets, integrating crypto payments into its platform last fall.

The withdrawal of the appeal also comes amid concerns over the Trump family's deepening ties with Silicon Valley. 

Trump’s sons have pursued several ventures in the cryptocurrency and broader tech industries, unveiling last year a decentralized finance platform built on Ethereum called World Liberty Financial. The president's eldest son, Donald Trump Jr., also joined Kalshi's board as an advisor in January. 

Meanwhile, Trump Media & Technology Group forged a partnership with Crypto.com in March to launch Bitcoin and Cronos-backed ETPs, which Trump Media itself plans to invest in.

The CFTC's move to drop its appeal ends a legal saga between Kalshi and federal regulators that goes back roughly two years.

In June 2023, Kalshi sought permission from the CFTC to launch event contracts based on the outcomes of U.S. congressional races. The Commission denied the startup’s request, raising concerns over whether elections-based wagers could influence the U.S.’ democratic processes. 

Kalshi then sued the regulator over its decision. The lawsuit culminated in a District Court judge ruling in September that Kalshi could offer U.S. elections-based events contracts. 

The market operator launched the betting pools on September 12, but it quickly paused those contracts after a higher court issued an emergency stay on an earlier order that sided with the startup. However, Kalshi later received legal approval to restart its U.S. election-based contracts in October.

Edited by Andrew Hayward