A federal appeals court has fast-tracked the Commodity Futures Trading Commission’s case challenging the right of the event exchange Kalshi to offer U.S. political election contracts.

The expedited appeal comes as Kalshi and another platform, Interactive Brokers, are offering an array of political contracts, including bets on the outcomes of the U.S. presidential election, U.S. Senate races, and party control of each chamber of Congress.

Kalshi touted its presidential election contracts on electronic signs in New York City’s Times Square over the weekend.

The quick appellate schedule calls for the CFTC to file its legal brief by Wednesday and for Kalshi to respond with its brief by Nov. 15 — 10 days after Election Day. The CFTC will then have until Dec. 6 to file a reply to Kalshi’s brief.

The U.S. Court of Appeals for the District of Columbia Circuit directed the court’s clerk to schedule oral arguments on the “first appropriate date” after that reply is filed.

It normally takes months in federal appeals courts for briefing and oral arguments to occur.

The CFTC had requested oral arguments on Dec. 2.

A commission spokesperson declined to comment on the schedule.

In an Oct. 2 court filing, the CFTC argued that a quick resolution of the appeal is in the public’s interest.

The CFTC told the appellate court that election contracts “are susceptible to market manipulation” and also pose a risk to election integrity or how the public views the integrity of elections.

Kalshi CEO Tarek Mansour, in a statement, said his company is “confident” that the law allows election contracts.

Kalshi is “looking forward to continuing to show how powerful these markets are at promoting election integrity and bringing more truth to the system!” Mansour said.

The CFTC in September lost a lawsuit in U.S. District Court in Washington, D.C., seeking to block Kalshi from offering contracts on which political parties would win control of both chambers of Congress in November.

The commission quickly appealed that ruling to the D.C. Circuit Court of Appeals, which promptly issued an injunction temporarily barring Kalshi from accepting congressional control contracts.

But the appeals court lifted that legal freeze on Oct. 2, saying the CFTC had failed to show that the commission or the public would be “irreparably injured” without that injunction remaining in effect during the appeal.

Kalshi resumed offering its congressional contracts, and then contracts on the outcome of the presidential election between former President Donald Trump and Vice President Kamala Harris, and other races.

As of Monday, Kalshi had booked more than $7 million in contracts on the presidential election outcome.

On Oct. 3, Interactive Brokers began offering political contracts to customers. The platform says more than 1 million such contracts had been traded.

“We’ve seen substantial demand for election-focused contracts on our platform in just a short time,” said Thomas Peterffy, founder of Interactive Brokers, in a statement. “This interest underscores the growing relevance of political prediction markets.”

Contract market KalshiEx has listed more than two dozen new options in recent days for the exchange’s customers to bet on political outcomes, including the presidential race, the popular vote and Electoral College margins of that race, and individual Senate contests.

The new contracts were added to Kalshi’s platform within days of a favorable federal appeals court ruling for the company Oct 2. The ruling lifted a temporary injunction that had blocked Kalshi from offering contracts on which political parties would control each chamber of Congress after the November elections.

A day later, Kalshi offered a contract for customers to bet on the winner of the presidential election, and potentially hedging any losses a customer might incur.

As of Wednesday, more than $3 million had been wagered in political contracts on Kalshi’s site, the lion’s share of which was on contracts of whether Vice President Kamala Harris or former President Donald Trump would win the presidential election.

Other contracts available for betting Wednesday included the outcomes of individual Senate races, which state would be the tipping point in the presidential election, which presidential candidates would win individual swing states, and the margin of victory in the race for the White House.

“It’s been great, there’s been a tremendous demand, ” Kalshi CEO Tarek Mansour said in an interview, about the response to the exchange’s new political contract options.

Adding those options “was always the plan,” said Mansour, as the company fought a ban on these types of contracts enacted by the Commodity Futures Trading Commission.

For Mansour, the betting contracts for political outcomes represent a way for investors to hedge against the broader financial impacts of one political outcome over another — not a means to influence the elections themselves.

“Each of these markets capture different risks,” he said. A president imposing tariffs, for example, could affect a customer’s financial situation.

He said Kalshi’s political outcome contracts are a more direct way to hedge such risks than the “bundles” of trades that investment banks offer, designed to give customers a hedge against the election of a certain presidential candidate.

“We have a healthy mix of both” customers looking to hedge financial risks and speculators, he said.

“Everything Kalshi is doing is within the law and regulated,” Mansour said, noting that the exchange has to keep records about its customers that are available to the federal government.

“We believe the law is on our side,” he said.

The CFTC disagrees.

Kalshi has “gone full throttle on election betting,” the CFTC said in a filing Tuesday with the U.S. Court of Appeals for the District of Columbia Circuit.

Even more political races could soon become available for betting with Kalshi contracts, the CFTC said, citing contract terms published on the exchange’s web site. Among them are the 435 individual House races and more state-level gubernatorial races.

“Some of these blatantly contradict Kalshi’s own arguments at the Court’s recent hearing — that its contracts are not gaming, because they are based on economically significant events,” the CFTC said in its filing.

“This cannot be said of a contract betting on whether a particular state will have the closest popular vote margin, or a contract on the winner of the popular vote, to name two.”

The CFTC’s filing supported a prior request by the regulator that the appeals court expedite the agency’s appeal of a lower-court ruling that allowed Kalshi to accept bets on the outcomes of political races.

A CFTC spokesman declined to comment to CNBC about the case. But the commission argues that Kalshi’s contracts might cast doubt on the integrity of elections.

A federal district court judge in Washington, D.C., ruled last month that the CFTC’s ban on Kalshi’s congressional contracts was not valid, because the regulator had erred in finding that the contracts involved gaming or gambling.

The appeals court initially blocked that judge’s ruling from taking effect, which meant Kalshi could not offer any political contracts.

But in last week’s ruling, a three-judge panel of the appeals court lifted the original ban, saying the CFTC “has failed at this time to demonstrate that it or the public will be irreparably injured” if the contracts were offered while the agency continued its appeal of the judge’s decision.

Appeals Court Judge Patricia Millett noted in the ruling that “the question on the merits” of the CFTC’s appeal is “close and difficult,” giving the regulator a reason to hope that its ban on political contracts will eventually be reimposed.

Another key issue for both Kalshi and CFTC is the timing of any court action.

The CFTC asked for an expedited briefing Tuesday, saying, “The public has an unusual interest in the prompt resolution of the merits of this case.”

That is because “the Court’s holding has implications for the regulatory landscape for event contracts, the role that a federal agency will play in policing election markets, and indeed issues of election integrity and the perception of election integrity,” the regulator said in the filing.

Mansour, the Kalshi CEO, said there is “zero evidence” that political contracts “compromise election integrity.”

Mansour said that any effort by a customer to sway the market’s effective prediction of a certain outcome, by wagering on a certain candidate, would cost a large amount of money.

And even if it worked in the short run, other customers would bet against that outcome once they saw that the market was mis-pricing the likelihood of that election result, he said.

A federal appeals court in Washington, D.C., cleared the way Wednesday for Americans to bet on the outcome of the 2024 congressional elections.

The appeals court in a decision rejected an effort by the Commodity Futures Trading Commission to prohibit the commodities exchange KalshiEx from offering “Congressional Control Contracts” as the federal agency appealed a lower court’s ruling that gave a green light for such bets.

The CFTC, which argued the contracts might cast doubt on the integrity of elections, “has failed to at this time to demonstrate that it or the public will be irreparably injured” without a stay on the contracts being offered during that appeal, wrote Judge Patricia Millett of the U.S. Appeals Court for the District of Columbia Circuit.

Millett, who was part of a three-judge panel hearing the case, said the agency could renew its emergency bid to block the contracts pending the outcome of its appeal “should substantiating evidence arise.”

There were no dissents on Wednesday’s 15-page decision in favor of KalshiEx, which offers customers contracts that can hedge the risk of certain events occurring.

The contracts at issue in the case are bets on predictions on which political party will control the Senate and House of Representatives at a future specified date.

But Kalshi’s co-founder Tarek Mansour in a social media post touting the appeals court decision suggested the exchange might offer contracts on the outcome of the U.S. presidential election.

“While the question on the merits is close and difficult, the Commission cannot obtain a stay at this time because it has not demonstrated that it or the public will be irreparably harmed while its appeal is heard,” Millett wrote.

“That failure is fatal to the Commission’s stay request because a showing of irreparable harm is a necessary prerequisite for a stay.”

The CFTC opposes the contracts because of concerns they could be used by foreign individuals or governments “directly or indirectly to manipulate the election-contract market,” despite Kalshi’s claim that only U.S. residents would be allowed to invest, the ruling noted.

Kalshi would allow individuals or entities to invest up to $100 million per congressional contract.

The CFTC declined to comment on the ruling, but noted that “this is for our request for an emergency stay. Not the appeal itself.”

CNBC has requested comment from KalshiEx.

The CFTC had barred KalshiEx from listing its congressional contracts on the exchange, which the commission regulates, on the ground that they would violate the laws of many states that ban gambling on elections.

But Judge Jia Cobb in U.S. District Court in Washington, D.C., ruled last month that the the regulator had erred in finding that KalshiEx’s congressional contracts involved gaming or gambling.

Cobb’s ruling was in effect for only about eight hours before the D.C. appeals court stayed it at the request of the CFTC.

But KalshiEx had accepted an unknown number of bets on the congressional elections during that time.

That administrative stay was lifted in Wednesday’s ruling.

The CFTC rejected Kalshi’s application to offer the contracts in September 2023.

The commission, among other things, found that the contracts were unlikely to be used for commercial-risk hedging, and also that they could threaten the integrity of elections by “creating monetary incentives for voters to support particular candidates or incentivizing the spread of misinformation,” the appeals court ruling noted.

The CFTC also cited a “special rule” under the Commodity Exchange Act, which allows the commission to review and ban certain types of event contracts if it determines they are contrary to the public interest. The types of activities subject to that ruling including “gaming,” as well as terrorism, assassination, war, or activity that is illegal under any federal or state law.

Kalshi sued the CFTC in November challenging the order as arbitrary and capricious.

In her subsequent ruling in the exchange’s favor, Judge Cobb found that under the special rule of the Commodity Exchange Act, ” ‘gaming’ must refer to the ‘act of playing a game’ or playing games for stakes,’ ” the appeals court decision noted.

“The district court also ruled that the term ‘involve’ refers to the ‘event being offered and traded’ under a contract, not the contract itself,” the appeals court panel said. “Thus, because the underlying events in the Congressional Control Contracts—’elections, politics, Congress, and party control’—are not themselves unlawful under state law, the contracts did not “involve” ‘illegal or unlawful activity.’ “

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