WASHINGTON, D.C.—Stephen Hall, Legal Director and Securities Specialist, issued the following statement on the filing of an amicus or “friend of the court” brief in KalshiEx LLC v. CFTC, a case that will determine whether gambling on U.S. elections will be allowed:
“It’s vital that the D.C. Circuit restore the CFTC’s decision to prohibit gambling on elections. Kalshi’s contracts are allowing large-scale wagers on an ever-increasing number of election contests across the country. This will inevitably undermine the integrity of those elections, foster rampant market manipulation, and victimize countless investors with the help of AI and digital engagement practices. We’ll watch and hope that the appellate court reverses the lower court’s decision and closes the lid on Pandora’s box.”
“Especially in these pivotal yet fragile political times, the last thing our country needs is for democracy to be undermined further by allowing gambling on elections. And investors will suffer in droves, as these markets are risky, easy to manipulate, and perfect vehicles for the popular ads and apps that make such wagering so tempting and for some, so addictive. It’s even worse, since these contracts serve no reliable, legitimate financial purpose—there’s no gain to offset the harm.
“Alarming reports of possible election manipulation have recently surfaced. Four anonymous accounts, likely under common control, are suddenly placing huge wagers—to the tune of $30 million—in favor of Trump’s presidential candidacy, through the offshore platform known as Polymarket. Some have rightly suggested that this trading surge may well be a ploy to create the misimpression of momentum to foster additional political support for Trump, boost morale, and keep donations and volunteer effort flowing. Others suggest it’s old-fashioned market manipulation for profit, in a new guise. Either way, it’s bad for our democracy and bad for investors.
“The threat is multiplying rapidly. After initially seeking to offer only wagers on the control of Congress, Kalshi has created dozens of new markets related to the 2024 election, including senate races, the presidential race, and even the margin of victory in states like Pennsylvania. Kalshi’s actions in recent weeks show there will be no end to its trivialization of elections, which are the keystone of our democracy. There has already been irreparable harm, and it will continue if the appellate court does not rule in favor of the CFTC.
“In our brief, we wholeheartedly support the CFTC’s decision to ban this form of gambling on both legal and policy grounds. Congress specifically foresaw the dangers posed by event contracts, and it authorized the CFTC to prohibit those that pose the greatest threats. Among them are contracts that involve gaming or activity that is unlawful under state law, and Kalshi’s election gambling contract falls into both categories. We further argue that the district court erred by flatly refusing to consider critically important factors as it held in favor of Kalshi: The remedial nature of the law at issue; the harms that these wagers threaten; and the wealth of expertise that the CFTC brought to its task of determining that such contracts are contrary to the public interest—a reservoir of knowledge that even the Supreme Court preserved as a resource for courts to consult in its recent Loper Bright decision.”
You can find the brief here.
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