A federal appeals court has ruled that betting on the outcome of U.S. Congressional elections can resume, allowing New York startup Kalshi to take bets on political party control after the upcoming elections.

The U.S. Court of Appeals for the District of Columbia Circuit dismissed the Commodity Futures Trading Commission's (CFTC) attempt to stop Kalshi from listing these derivatives ahead of the presidential election.

The CFTC has opposed political betting, citing concerns about potential manipulation and undermining public confidence in elections.

The CFTC argued that these contracts constituted unlawful gaming under state law and were against public interest, particularly regarding which party would control Congress.

Judge Patricia Millett emphasized that the CFTC failed to prove that it or the public would suffer irreparable harm during the appeal process.

With U.S. elections scheduled for November 5, 2023, the timing of this ruling is particularly significant.

This ruling marks the first time Americans can legally bet on an election in a regulated market, despite the CFTC's initial reluctance.

Kalshi previously sought approval from the CFTC to list political event contracts, but the commission denied the request due to concerns about manipulation and election integrity.

Kalshi's legal victory may positively impact other crypto-native prediction markets amid potential CFTC enforcement actions.

Critics warn that allowing betting on elections could threaten democracy, while supporters see potential value in these contracts as financial tools.

Despite the ruling, the CFTC is working on new regulations that could ban bets on political events across all regulated futures exchanges.

Kalshi's spokesperson indicated that the company would soon resume listing the contracts but did not provide a specific timeline.