Financial Services Association, September 13 (Editor: Xiaoxiang) On Thursday, local time, shortly after a US federal judge rejected a last-minute request from the US Commodity Futures Trading Commission (CFTC) to suspend execution of the judgment, a case contract relating to which political party will control the Senate and House of Representatives after this year's general election went live on the derivatives trading platform Kalshi.

This also indicates that the door to legalizing betting on the US election has probably been completely opened...

According to reports, after the hearing ended, US District Court Judge Jia Cobb rejected repeated requests from the CFTC to block and delay the listing of the contract.

The CFTC filed an urgent motion at the beginning of this week requesting the court to suspend execution of the ruling in favor of Kalshi made last Friday. The ruling overturned a ban made by the CFTC in 2023, thereby allowing the listing of some derivatives trading contracts related to the general election.

In an opinion released before the hearing, Cobb argued that the CFTC had exceeded its authority by trying to prevent Kalshi from making personal bets on the election. Cobb pointed out that definitive proof of “definite and significant” irreparable damage was needed to persuade her to issue a stay, not just the vague possibility that “future damage will be caused.”

Chief Attorney Kalshi also argued during the hearing that any delay in the company's listing and election-related contracts would cause economic damage to Kalshi, and would also push the business to unregulated competitors, particularly the crypto-based political betting platform Polymarket — although the company is banned from doing business in the US, its trading volume is extremely huge.

Kalshi CEO Tarek Mansour said in a statement that it is finally time for these markets to show the world their powerful ability to provide signals in the midst of noise and let us know the truth about the future. The election market was legalized in the US for the first time in 100 years. Americans are finally able to trade elections in a market regulated by the US.

In response, the CFTC stated in a briefing that if the court allows the continued execution of contracts involving events involving elections, the agency will have little power to prevent other exchanges already registered with swaps and futures regulators from doing the same.

The agency also argued that in some states, gambling on elections is illegal, that related deals damage the fairness of elections, and that the agency is not responsible for monitoring elections.

Currently, the CFTC has filed a related appeal with the Washington Circuit Court of Appeals.

US investors can legally “gamble” on the election

However, regardless of the outcome of the CFTC's appeal, the relevant incident contract may be expected to “land” first. According to several media reports, soon after the US court handed down the above verdict on Thursday, Kalshi immediately launched the above case contract against the ownership of the Senate and House of Representatives.

According to the simulated quote above, if you bet on the Republican Party winning the Senate and the final results match, you will pay 75 cents to get back 1 dollar. Conversely, if you bet on the Democratic Party, you will get a four-fold return if you win.

However, the latest opening of its website shows that the relevant transaction will have to wait until the court process is officially completed.

Some domestic investors may be unfamiliar with “event contracts,” but in fact, we introduced the relevant background to investors in April of this year:

Generally speaking, an event contract is a derivative contract used to trade based on the results of a specific event. These contracts allow people to bet on real-world outcomes such as monetary policy, the success or failure of a lunar landing, the ownership of various awards, and even general election results, and settle based on the results after the incident has occurred.

Event contracts can also be considered a specific type of binary option. This means that there are only two possibilities for the outcome of an event: yes or no, happening or not. When the event occurs, the contract will be settled in a specific amount based on the actual results. If the results of the contract match the investors' predictions, they can make a profit; if the results don't match the predictions, they will lose money.

Kalshi is a derivatives trading platform that was registered with the CFTC in its early years and focuses on event-driven contract trading. The Kalshi platform allows users to buy or sell contracts, which represent different outcomes of specific events. For example, users can predict a candidate's victory in a political election, predict product sales performance at a company's product launch, or predict winning teams at a sporting event.

According to media reports, in addition to Kalshi, Yingtou Securities, a popular brokerage platform in the US, is currently planning to launch a market where investors can bet on the presidential election results. Thomas Peterffy, founder and chairman of Yingtou Securities, said in an interview that starting next Monday, Yingtou Securities plans to allow its users to bet on whether Harris will defeat Trump in the November election.

Peterffy added that Yingtou Securities is expected to follow suit and allow similar bets on Senate campaigns in swing states.

Laurian Cristea, a partner at law firm Barnes & Thornburg, which specializes in exchanges, clearing houses and case contracts, said that allowing the use of event contracts to bet on which party will control the House and Senate next year is an “important moment.” The formulation of event contract rules previously proposed by the CFTC is now an issue, and exchanges that have already registered with the CFTC may also provide related new products in the future.

Cristea also said the move would benefit former US (gaming) consumers because “people who previously traded in unregistered or illegal markets abroad now have the opportunity to trade in monitored and federally regulated markets and abide by clear rules.”

But there is no doubt that there are not a few voices against this move. Oregon Democratic Senator Jeff Merkley said in a statement that when people place big bets in the election and black money can be used to discredit candidates, these factors will be perfectly combined to destroy people's trust in democracy. He also said that the court's ruling “seriously undermines the impartiality of our upcoming elections.”