The CFTC has accused prediction platform Kalshi of transforming into an "online casino" following a favorable court ruling that allowed it to offer trading on the 2024 U.S. presidential election.

The controversy began in October 2022 when the CFTC ordered Kalshi to stop offering election-related events contracts, citing U.S. laws against political betting. Kalshi responded by suing the regulator, arguing overreach of authority. While a lower court initially sided with Kalshi in September, the CFTC's appeal led to a temporary restraining order that was later lifted weeks before the election.

According to the CFTC's latest court filing, Kalshi quickly pivoted its marketing strategy after the restraining order was lifted. The company erected a Las Vegas Strip billboard promoting "Kalshi odds" and encouraging people to "Bet the election." The platform introduced "Parlay Contracts" and celebrated surpassing FanDuel in App Store rankings.

The regulatory body argues that these actions contradict Kalshi's previous claims that its election markets were designed to provide valuable political insights and help traders hedge against political economic risks. The CFTC noted that traders ultimately wagered $132 million through Kalshi on the presidential election.

The CFTC is now requesting the appeals court to overturn the lower court's ruling that determined Kalshi's congressional control contracts do not constitute unlawful gaming activity. The regulator maintains that Kalshi is attempting to redefine established terms like "transaction," "contest," and "gaming" to suit its purposes.

The case highlights the ongoing tension between innovative financial products and traditional gambling regulations in the United States. Kalshi, whose Arabic name means "everything," operates under CFTC oversight because its events contracts are classified as derivatives, allowing users to speculate on various outcomes from cryptocurrency prices to election results.

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