The DC District Court ruled in favor of prediction market operator Kalshiex LLC in its efforts to offer event contracts based on the party in control of the US House and Senate. The Commodity Futures Trading Commission (CFTC) opposed these offerings citing its “special rule” authority to reject offerings that constitute, among other items, contracts that are based on gaming or illegal activity. Gaming is not defined in the CFTC's regulations.

The Court's decision turned on the interpretation of the term “gaming.” The CFTC advanced a position that “gaming” and “gambling” were essentially synonymous, and because the event contracts involved risking money on the prospect of winning more money on the outcome of an event, they represented impermissible gaming contracts.

However, the Court took the position that “gaming” and “gambling” were not interchangeable, and that the CFTC's position would make the “special rule” applicable to all event contracts, making such a position implausible. Instead, the Court held that “gaming” includes the activity of playing games and playing games for stakes, and as such, the proposed event contracts were not gaming, as they were not in any way involved with “gaming.”

Thus, because neither “gaming” nor “unlawful activity” is implicated in the proposed event contracts, the Court ruled in favor of Kalshi.

The district court case is Kalshiex LLC v. Commodity Futures Trading Commission, Civil Action No. 23-3257 (JMC), 2024 U.S. Dist. LEXIS 163925 (D.D.C. Sep. 12, 2024).

If the Court agreed with the CFTC's construction, all event contracts would be subject to review under the special rule because they all involve purchasing (and thus risking money on) some contingent event with the hope of receiving a payoff.