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.

This decision follows the U.S. Court of Appeals for the District of Columbia Circuit dismissing the Commodity Futures Trading Commission's (CFTC) attempt to block Kalshi from listing these derivatives ahead of the presidential election.

The ruling upholds a previous decision that permitted KalshiEX LLC to list contracts betting on election outcomes, marking a significant shift in the regulatory landscape.

Historically, the CFTC has blocked election-betting derivatives due to concerns about potential manipulation and the integrity of elections.

CFTC Chair Rostin Behnam has voiced concerns that allowing such contracts could undermine the agency's regulatory role and public confidence in elections.

Judge Patricia Millett emphasized that the CFTC failed to demonstrate that the public would suffer irreparable harm if Kalshi's contracts were allowed to proceed.

Supporters of election-betting markets argue that they provide a regulated way for investors to hedge against political risks and offer insights into public voting trends.

The ruling allows the CFTC to seek another pause on Kalshi's contracts if more concrete evidence of harm arises in the future.

As of now, traders have already begun placing bets, with Kalshi recording over $300,000 in contracts related to the presidential race shortly after launching its markets.

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

Kalshi and Interactive Brokers' ForecastEx are now among the few U.S.-regulated, dollar-denominated prediction markets taking bets on the presidential race.

KalshiEX's legal victory may pave the way for other crypto-native prediction markets amid potential CFTC enforcement actions.