The United States Commodity Futures Trading Commission says prediction markets can fall to “spectacular manipulation” in the latest filing against US predictions market Kalshi.
“Documented cases of market manipulation have already been realized in the very markets Kalshi points to,” the CFTC stressed, pointing to recent incidents on competitor platforms in the Sept. 14 reply in support of a motion to stay.
Polymarket experienced a “spectacular manipulation” attempt by a group of traders gambling on Vice President Kamala Harris to win the 2024 US presidential election, claimed the CFTC, while a “fake poll” showing Kid Rock leading Senator Debbie Stabenow 30% to 26% in a senate vote on PredictIt impacted the price of Stabenow’s reelection contract.
The CFTC partially lost its initial case against Kalshi on Sept. 6, effectively allowing the platform to offer election betting, Kalshi’s founder, Tarek Mansour, claimed in a Sept. 9 X post.
However, District Court Judge Jia Cobb issued a temporary stay order following an emergency motion from the CFTC on Sept. 9 — intended to pause Kalshi from offering US election markets.
Interestingly, Mansour said the US first election market went “live” three days later on Sept. 12 — however, it was taken down hours later after the platform was hamstrung with another stay order — this time in the appeals court.
The CFTC’s latest filing was a reply in support of the stay motion in the appeals court.
The commodities regulator filed a notice to appeal on Sept. 12.
Despite that, Cobb said the CFTC “exceeded its statutory authority” by ordering Kalshi to halt its election markets in a separate Sept. 12 opinion.
In arguing against the CFTC’s motion for a stay on Sept. 13, Kalshi said such an order would cause irreparable financial harm to the company while similar products continue to be offered on other unregulated platforms.
But the CFTC slammed Kalshi’s argument as “sophomoric” in their most recent Sept. 13 filing, stating:
“A pharmacy does not get to dispense cocaine just because it is sold on the black market.”
The commodities regulator also said the financial opportunities Kalshi would miss out on “pale” compared to the harm it could cause by allowing more bets placed on the upcoming presidential election.
A key factor of the CFTC and Kalshi case was whether the prediction platform’s operations constitute “gaming” under US laws and thus fall under the CFTC’s authority.
Cobb’s Sept. 6 ruling was viewed as a big win for the broader crypto industry.
“[This is] “great news for anyone who believes that having skin in the game is a fundamental aspect of being American,” Nick Tomaino, founder of the crypto fund 1confirmation said at the time.
