Milbank LLP has secured a significant victory on behalf of KalshiEx LLC (“Kalshi”) in a case challenging the CFTC’s 2023 order prohibiting Kalshi from listing certain political event contracts on its regulated derivatives exchange.
In September 2023, the CFTC prohibited Kalshi from listing to trade contracts on US election outcomes, specifically which political party will control the House or the Senate. The CFTC concluded that those contracts were prohibited by the Commodity Exchange Act, because they constituted unlawful gaming and were prohibited by state law. Shortly thereafter in November 2023, Kalshi filed a complaint in the US District Court for the District of Columbia alleging that the CFTC’s order violated the Commodity Exchange Act and the Administrative Procedure Act. Kalshi argued that the CFTC misread the plain language of the Commodity Exchange Act, which does not prohibit contracts on political events, and that it acted in an arbitrary and capricious manner.
On September 6, 2024, the District Court ruled in favor of Kalshi, vacating the CFTC’s 2023 order and allowing Kalshi to list election-based event contracts. The CFTC continues to contest when the court’s order should take effect, but Kalshi has nonetheless won on the merits.
Commenting on this landmark decision, Milbank Litigation & Arbitration partner Joshua Sterling said, “We are very pleased to have represented Kalshi along with co-counsel in securing this important victory. It is a win for Kalshi and for all CFTC-regulated derivatives markets that want to pursue responsible innovation under the rule of law. We are glad the court agreed with Kalshi, and we look forward to seeing this wonderful client continue to have great success in its business.”
The Milbank team was led by Mr. Sterling. Kalshi was also represented by Jones Day in this matter.
