Judge Jia Cobb of the U.S. District Court for the District of Columbia made a groundbreaking ruling this week in favor of the prediction market Kalshi in its case against the Commodity Futures Trading Commission (CFTC). This ruling, according to industry professionals, could be one of the most significant in the history of prediction markets.
The CFTC, under the leadership of Rostin Benham, has been taking a hardline stance against prediction markets. Earlier this year, the Commission imposed a hefty penalty on Polymarket and ordered it to cease trading in the U.S. In another instance, the CFTC withdrew PredictIt’s no-action letter, effectively shutting down the platform. Kalshi, however, was able to operate legally as a regulated exchange, giving it certain protections.
In September 2023, Kalshi attempted to certify a market related to the control of Congress, but the CFTC quickly moved to block it, arguing that political contracts like these constitute gaming. However, Judge Cobb disagreed with this assessment, stating that Kalshi’s contracts are related to elections and politics, not illegal activities or gaming.
Despite the ruling in favor of Kalshi, the CFTC sought a stay on the decision, claiming that allowing these contracts to be listed would cause irreparable harm. The D.C. Circuit Appeals Court granted the CFTC’s request for a stay, raising questions about the agency’s motives.
The CFTC’s actions are seen as part of “midnight rulemaking,” a practice where outgoing administrations rush to push through last-minute regulations before a new administration takes over. In this case, the CFTC has proposed a rule to define gaming in a way that could potentially impact prediction markets.
However, Judge Cobb’s ruling may have far-reaching implications. The proposed rule by the CFTC does not change the critical language around what constitutes an activity “involving” gaming. Elections, being the underlying contests themselves, may still fall outside the CFTC’s authority under this ruling.
While the appeals process will ultimately determine the outcome, there is hope that Judge Cobb’s ruling could set a new precedent for the regulation of prediction markets. The trend of federal regulators banning markets they disfavor rather than properly regulating them has raised concerns among industry experts. Allowing well-regulated U.S. entities to offer novel products like election event contracts could benefit American consumers and keep these markets onshore rather than pushing them offshore. In our view, it is imperative to consider the public’s best interest in all decision-making processes. When it comes to matters that directly impact the general population, it is crucial to prioritize transparency and accountability. Unfortunately, there are instances where actions are taken that do not align with what is best for the public.
One such example is the recent decision to implement a new policy that restricts access to vital information. This move has raised concerns among many stakeholders, including members of the public, who rely on this information for various purposes. By limiting access, the authorities are essentially hindering the public’s ability to make informed decisions and stay informed about important matters.
Furthermore, this decision also raises questions about the motives behind such restrictions. It begs the question of whether this policy is truly in the public’s best interest or if there are ulterior motives at play. Without transparent communication and clear justification for these actions, it is difficult to trust that this decision was made with the public’s well-being in mind.
In a democratic society, it is essential for the public to have access to information that affects their lives. By restricting this access, it not only undermines the principles of transparency and accountability but also erodes the trust between the authorities and the people they serve. It is crucial for decision-makers to consider the broader implications of their actions and ensure that they are acting in the best interest of the public.
In conclusion, it is clear that the recent policy change is not in the public’s interest. It is essential for decision-makers to prioritize transparency, accountability, and the public good in all their actions. By doing so, they can uphold the principles of democracy and foster trust with the people they serve. Ultimately, it is important to always consider the broader impact of decisions and ensure that they are made with the public’s best interest at heart.