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Cryptocurrency News Articles
Court Rejects CFTC’s Bid to Shut Kalshi Prediction Market Platform
Oct 04, 2024 at 01:29 am
The ongoing legal dispute between the CFTC and Kalshi is intensifying, but not in favor of the regulatory body.
The upcoming U.S. presidential election is a hot topic in the financial industry, with a surge in activity on prediction markets. These platforms allow users to place bets on various aspects of the election, such as who will win or the likelihood of certain policies being implemented.
However, the increasing activity on prediction markets has also attracted the attention of regulators, particularly the U.S. Commodity Futures Trading Commission (CFTC). The commission has been attempting to shut down ongoing bets related to the upcoming election, but its efforts have faced legal challenges.
Court Rejects CFTC’s Bid to Shut Kalshi
In the latest development, a U.S. appeals court has rejected the CFTC's request to halt operations of prediction platform Kalshi, which is offering derivatives wagering on the November U.S. presidential election.
On Wednesday, Oct. 3, the United States Court of Appeals for the District of Columbia Circuit dismissed the CFTC's application for a stay order, which sought to block Kalshi from continuing to offer these bets.
This ruling comes after the commission filed for an “emergency stay order” on Sept. 6, following a loss in its long-running battle against Kalshi over the legality of its election wagering derivatives.
According to the appeals court, the CFTC failed to provide sufficient evidence to support its claims for the stay order request. The commission did not demonstrate that “irreparable harm” would occur if Kalshi were to continue its operations, the court stated.
The commission's concerns about potential market manipulation and the integrity of the electoral process were deemed largely speculative and insufficient to justify its request, according to the court.
Despite the setback, the court's ruling leaves the door open for the CFTC to re-file its application if substantial evidence does emerge. This suggests that the commission may make another attempt to shut down Kalshi's election wagering derivatives, especially as it continues to ramp up its scrutiny of prediction markets.
CFTC Ramps Up Scrutiny of Prediction Platforms
In a recent interview, CFTC Chair Rostin Behnam highlighted the commission's intention to crack down on prediction markets that violate regulations, mentioning Kalshi and decentralized prediction platform Polymarkets by name.
According to Behnam, several risks are involved with unregulated prediction markets, and he stated that they could influence voter behavior, potentially impacting democratic processes.
The commission has asserted that the Commodity Exchange Act prohibits contracts tied to certain sensitive topics and that it's prepared to use its authority to crack down on platforms that enable such contracts.
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