A federal judge has ruled that the U.S. Commodity Futures Trading Commission (CFTC) did not have the authority to block cryptocurrency exchange Kalshi from listing political prediction markets in the U.S. The judge stated that elections are not a form of "gaming" and therefore the CFTC should not have conducted a public interest review that led to the rejection of Kalshi's proposed contracts.

The judge cited the Supreme Court's Loper Bright ruling that overturned the Chevron deference precedent, which had previously given regulatory agencies more leeway in interpreting their own authority. The judge said Congress had revoked the CFTC's ability to conduct public interest reviews of certain derivative contracts, unless they fit within specific categories like terrorism or gaming.

In the Kalshi case, the judge disagreed with the CFTC's argument that political prediction markets fall under the "gaming" category. The judge wrote that Kalshi's proposed contracts, which would allow users to take positions on which political party might control Congress, "do not involve unlawful activity or gaming" and are simply related to "elections, politics, Congress, and party control".

The judge emphasized that her ruling was based on the law, not policy preferences. She acknowledged the CFTC's concerns that allowing trading on election outcomes could threaten the public interest, but said the court had no occasion to consider that argument, as its only task was to determine what Congress had authorized the CFTC to do.

The ruling comes as the CFTC is considering a proposal to ban all exchanges under its purview from listing political prediction markets. The judge's decision could have broader implications for the CFTC's approach to regulating these types of markets going forward.

Source: https://www.coindesk.com/policy/2024/09/12/cftc-has-no-authority-to-reject-election-contracts-judge-says/

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