CFTC Moves to Dismiss Appeal Against Kalshi, Nearing End of Prediction Market Legal Battle

On May 5, the U.S. Commodity Futures Trading Commission (CFTC) filed a motion to voluntarily dismiss its appeal against Kalshi, a New York-based prediction market platform, in a significant development for the U.S. prediction market industry. The unopposed motion, submitted to the U.S. Court of Appeals for the District of Columbia Circuit, follows a two-year legal dispute that began when the CFTC attempted to block Kalshi from offering event contracts tied to U.S. election outcomes. If approved by the court, the dismissal will solidify Kalshi’s ability to offer political event contracts and may pave the way for broader adoption of prediction markets, including those integrated with cryptocurrency payments.

Kalshi announced the CFTC’s motion on its official X account on May 6. CEO Tarek Mansour told Reuters, “Today is historic. We have always believed that doing things the right way, no matter how hard, no matter how painful, pays off. This result is proof of that Kalshi's approach has officially and definitively secured the future of prediction markets in America.”

Background of the Kalshi-CFTC Legal Dispute

Kalshi, launched in 2021, is a CFTC-regulated derivatives exchange that allows users to trade event contracts—binary “yes” or “no” wagers on outcomes ranging from elections to sports, weather, and economic indicators. The platform gained significant traction during the 2024 U.S. presidential election, reporting over $500 million in trading volume for its election-related markets. In June 2023, Kalshi sought CFTC approval to list contracts on which party would control the U.S. House and Senate, but the regulator denied the request, arguing that such contracts constituted “gaming” and posed risks of market manipulation and public harm.

Kalshi challenged the CFTC’s decision in November 2023, filing a lawsuit that culminated in a September 2024 ruling by D.C. District Court Judge Jia Cobb. The court sided with Kalshi, determining that the CFTC lacked the authority to ban election contracts based on a public interest review and that elections did not qualify as “gaming.” The CFTC appealed the ruling but was denied a stay, allowing Kalshi to list election contracts during the 2024 election cycle. The regulator’s latest motion to dismiss the appeal, approved by a 3-0 commission vote with one abstention, suggests a resolution with Kalshi, with both parties agreeing to bear their own legal costs and Kalshi waiving any right to sue the CFTC over the litigation.

Kalshi’s Role in Prediction Markets and Crypto Integration

Kalshi has emerged as the largest prediction market platform in the U.S., distinguishing itself from competitors like Polymarket by operating under CFTC oversight rather than as a decentralized, offshore entity. The platform’s event contracts, which function similarly to stock trading but pay out based on event outcomes, have attracted both retail and crypto-native users. In November 2024, Kalshi began accepting USDC deposits to onboard more crypto users, a move that aligns with its partnership with Robinhood to launch a prediction markets hub in March. This integration has positioned Kalshi as a bridge between traditional finance and the crypto ecosystem, with its election markets displayed prominently in Times Square during October 2024.

Regulatory Shifts and Industry Implications

The CFTC’s decision to drop its appeal reflects a broader shift toward a more permissive regulatory stance under the Trump administration and acting CFTC Chair Caroline Pham, appointed in early 2025. The regulator’s move aligns with reduced oversight of technology and crypto firms. CFTC Commissioner Summer Mersinger, appointed under President Joe Biden, had previously supported prediction markets, stating in February 2025 that election contracts were “here to stay.”

The dismissal, if approved, could invigorate the U.S. prediction market industry, encouraging platforms to expand offerings in political, sports, and economic contracts. However, challenges remain. State gaming regulators in Nevada and New Jersey have issued cease-and-desist orders against Kalshi’s sports-related contracts, arguing they constitute gambling. Kalshi has countersued, asserting that its contracts fall under CFTC jurisdiction, and has secured preliminary favorable rulings in both states. The outcome of these cases could further clarify the regulatory boundaries between prediction markets and traditional gambling, potentially influencing platforms like Polymarket and Sporttrade.