Late Friday, the U.S. Commodity Futures Trading Commission canceled a public meeting to address the matter and started a formal study and public comment period to assess prediction market Kalshi’s proposed contracts to wager on who will control Congress. A 90-day review of KalshiEX LLC’s self-certified contracts for betting on which major political party would control Congress after the next election has begun, the Commodity Futures Trading Commission (CFTC) stated on Friday evening.At the end of the 90 days, the CFTC will need to decide whether to take action or try to prolong it.
The CFTC also announced a 30-day public comment period, during which the public is invited to submit comments on 24 different issues related to the contracts, including whether they are “similar to gaming” as that term is defined by the CFTC regulations, if the proposed betting is legal, how they differ from earlier attempts, and more.Last week, the CFTC planned a public meeting for June 26 that was meant to allow the regulator to decide whether to start its probe.Friday’s cancellation was confirmed in another press release.
Prior to the 2022 midterm elections in the United States, Kalshi intimated that the CFTC would approve his political event contracts. However, staff later advised against accepting the contracts, according to Bloomberg.Later, Kalshi withdrew its request and then resubmitted it in an effort to allay regulator worries.Summer Mersinger and Caroline Pham, two CFTC commissioners, disagreed with the decision to begin a new review period on Friday.Mersinger argued that opening up another comment period would postpone any resolution because Kalshi had been acting in good faith to resolve the regulator’s concerns.
Furthermore, according to Mersinger, no description of “gaming” for CFTC purposes applies to Kalsh’s self-certified contracts. “The Commission should treat Kalshi’s certification in the same manner it treats all DCM certifications of new products, and then do what Congress provided: Undertake a public rulemaking process to establish a legal framework for exercising its discretion to determine whether event contracts, including those relating to political control, may be prohibited from trading because they are contrary to the public interest,” she said.
Pham’s dissent cited a decision by an appeals court on PredictIt, another prediction market that was shut down by the CFTC last year.PredictIt filed a lawsuit to keep functioning, and the Fifth Circuit Court of Appeals ordered that PredictIt be permitted to do so for at least two months following the court’s decision in the original lawsuit.According to Pham, if the CFTC attempted to terminate Kalshi’s contracts for political events, it would be in violation of the appeals court’s ruling.