Caixin News, September 13th (Editor Xiaoxiang) Shortly after a US federal judge rejected the Commodity Futures Trading Commission's (CFTC) last-minute request for a stay of execution, the event contracts that determine which party will control the Senate and the House of Representatives after this year's election briefly went live on the derivative trading platform Kalshi.

This also suggests that the door to the legalization of betting on the US elections may have been completely opened...

It is reported that, after the hearing, Judge Jia Cobb of the US District Court rejected the CFTC's repeated requests to prevent and postpone the listing of the contract.

Earlier this week, the CFTC filed an emergency motion requesting the court to stay the favorable ruling for Kalshi made last Friday, which overturned a ban issued by the CFTC in 2023, allowing some election-related derivative trading contracts to be listed.

In the opinion filed by Cobb before the hearing, Cobb believed that the CFTC's attempt to prevent individuals from betting on elections exceeded its authority. Cobb pointed out that there must be decisive evidence of "determined and significant" irreparable harm to convince her to issue a stay, rather than just the possibility of vague "future harm."

At the hearing, Kalshi's chief lawyer also argued that any delay in listing contracts related to elections would cause economic damage to Kalshi and would also push business towards unregulated competitors, especially political gambling platform Polymarket, which is based on cryptocurrencies - although the company is prohibited from operating in the United States, its trading volume is unusually large.

Kalshi CEO Tarek Mansour stated in a statement that it is finally time for these markets to demonstrate their powerful function of providing signals in the noise and to let us understand the truth of the future. The market for election trading is legalized in the United States for the first time in 100 years. Americans can finally engage in election trading on markets regulated by the United States.

In this regard, the CFTC stated in the brief that if the court allows the event contracts involving elections to continue, the agency would have no power to prevent other exchanges that are already registered with the derivatives and futures regulatory agencies from doing the same.

The agency also argued that in certain states, gambling on elections is illegal, and such transactions would harm the fairness of the elections, and the agency is not responsible for overseeing elections.

Currently, the CFTC has filed a related appeal with the United States Court of Appeals for the District of Columbia.

American investors can now legally "gamble" on elections.

However, regardless of the outcome of the CFTC's appeal, the relevant event contracts may soon be implemented. According to multiple media reports, shortly after the aforementioned ruling was made by the U.S. court on Thursday, Kalshi launched the aforementioned event contracts in a timely manner.

According to the simulated quotes above, if you bet that the Republican Party will win the Senate and the final result matches, you will pay 75 cents and receive 1 dollar in return. Conversely, if you bet on the Democratic Party and win, you will get a fourfold return.

However, the latest opening of their website shows that trading related to the contracts still needs to wait for the court process to be completed officially.

Some domestic investors may be unfamiliar with "event contracts", but in fact, we introduced the relevant background to investors in April this year.

Simply put, event contracts are a type of derivative contract used for trading based on the outcome of specific events. These contracts allow people to bet on real-world outcomes such as currency policies, the success or failure of a moon landing, the winners of various awards, and even election results, and settle based on the results after the event occurs.

Event contracts can also be seen as a specific type of binary options. This means that there are only two possible outcomes for the event: yes or no, happen or not happen. After the event occurs, the contract will settle for a specific amount based on the actual result. If the contract's outcome matches the investor's prediction, they can make a profit; if it does not align with the prediction, they will incur losses.

Kalshi is a derivative trading platform that was registered with the CFTC in the early years, focusing on event-driven contract trading. The Kalshi platform allows users to buy or sell contracts representing different outcomes of specific events. For example, users can predict the winner of a political election, forecast product sales performance at a company's product launch event, or predict the winning team in a sports match.

According to media reports, besides Kalshi, the popular brokerage platform in the USA, Interactive Brokers, has also planned to launch a market where investors can bet on the outcome of the presidential election. Interactive Brokers' founder and director, Thomas Peterffy, stated in an interview that starting next Monday, Interactive Brokers plans to allow its users to wager on whether Harris will defeat Trump in the November election.

Peterffy added that Interactive Brokers also expects to follow up by allowing similar bets on the Senate elections in swing states.

Laurian Cristea, a partner at the law firm Barnes & Thornburg specializing in exchanges, clearinghouses, and event contract business, stated that allowing the use of event contracts to bet on which party will control the House and Senate next year is a "critical moment". The establishment of event contract rules proposed by the CFTC has become an issue, and those exchanges already registered with the CFTC may also potentially offer related new products.

Cristea also mentioned that this move benefits previous American gambling consumers because "those who previously traded in unregistered or illegal markets abroad now have the opportunity to trade in monitored and federally regulated markets, and comply with clear rules".

However, there is no doubt that there are also many voices of opposition to this move. Oregon Democratic Senator Jeff Merkley stated in a release that when big bets are placed on elections and dark money can be used to smear candidates, these factors perfectly combine to undermine people's trust in democracy. He also expressed that the court's decision "seriously undermines the integrity of the upcoming elections".