Plans by prediction market Kalshi to let users bet on which party will control the chambers of Congress have been turned down by regulators at the Commodity Futures Trading Commission (CFTC).
The regulator said the contracts would involve unlawful gaming and activity and would be "contrary to the public interest" after KalshiEx LLC made a submission in June 2023.
The contracts would have been settled in cash and let users bet on yes or no questions about whether the Republicans or Democrats would control the House and Senate in a given term.
Last year, an appeals court ruled that another prediction market, PredictIt, should be allowed to continue operating until a final court ruling, despite a CFTC order to shut down.
In a statement emailed to CoinDesk, Kalshi's Chief Executive Officer Tarek Mansour said he "fundamentally" disagrees with the CFTC decision, but added he was optimistic the company's "vision will be recognized and embraced" in time.
"It's a known fact that radical innovation often requires time to be understood and accepted," Mansour added, citing a range of financial novelties that initially met skepticism, including exchange-traded funds, grain futures and insurance.
For Dennis Kelleher, CEO of consumer advocacy organization Better Markets, the CFTC's decision was "well-grounded" and "thoughtful," according to a statement in which Kelleher cited risks to election integrity and alleged violations of the Commodities Exchange Act in Kalshi's proposal.
"These markets are not intended or designed to be casinos for wild speculation-only bets," Kelleher said. "That's why the law places limits on how much people can speculate, or gamble, in these markets."
UPDATE (Sept. 22, 17:45 UTC): Adds comments from Mansour, Kelleher
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