The late summer burst of opinions appears to have ended, as the D.C. Circuit released no published opinions last week. But the court did hear oral argument in a noteworthy emergency administrative law appeal, KalshiEx LLC v. Commodity Futures Trading Commission.

Kalshi seeks to offer what it calls Congressional Control Contracts. Buyers who correctly predict control of the House of Representatives or Senate in the next Congress will receive one dollar for each such contract purchased. The CFTC prohibited Kalshi from listing its contracts on the ground that they “involve” “unlawful activity” and “gaming,” over two dissents. Kalshi sought review in the U.S. District Court for the District of Columbia.

The district court (Cobb, J.) granted summary judgment for Kalshi earlier this month on the ground that the contracts do not involve unlawful activity or gaming. Among other things, the court rejected the CFTC’s argument that “gaming” was synonymous with “gambling.” The district court also rejected the CFTC’s argument that a contract “involves” a specified activity when trading in the contract amounts to the enumerated activity. It instead agreed with Kalshi that a contract “involves” a specified activity only when the underlying event constitutes or relates to that activity. The D.C. Circuit (Millett, Pillard, and Pan, JJ.) granted an administrative stay and held oral argument.

One interesting aspect of this case has to do with the CFTC’s statutory interpretation and litigation strategy. The case was briefed in the district court before the Supreme Court overruled Chevron, and the CFTC does not seek any form of deference. But even if it had sought deference, securing it might be an uphill climb. The CFTC was not exercising an express delegation of authority to interpret the statutory terms at issue; the agency’s interpretation does not appear to be a longstanding one; and the meaning of those words does not turn on specialized expertise. To the extent the major questions doctrine survived the decision in Loper Bright, there is also a plausible argument that the Congress did not empower the CFTC to regulate election integrity under the Commodity Exchange Act, particularly in light of pending legislation on the subject. (For more on Loper Bright at the D.C. Circuit, see here and here.)

Another noteworthy aspect of this case involves the scope of the CFTC’s regulatory powers. There is substantial interest in election-related derivatives, and this case represents a significant test of the CFTC’s power to regulate them. More broadly, as Kalshi has argued, if this contract “involves gaming” because purchasing a contract is itself gaming, then it is hard to see what event contracts would not be subject to prohibition. 

A final interesting aspect of this case has to do with the course of litigation. The case comes to the D.C. Circuit in a stay posture. The urgency is, in part, the result of the venue provision requiring Kalshi to litigate its case in the district court in the first instance. And the urgency may lead the D.C. Circuit to reckon with the merits of the case on a highly expedited basis. Perhaps because of the possibility of a decision grappling with the merits, the D.C. Circuit took the unusual (though not unheard-of) step of holding oral argument on a stay motion.

Of course, none of these issues may prove dispositive. During the more than two hours of oral argument, Judge Pan suggested that the “weakest point” for the CFTC was the showing of irreparable harm required for a stay. Judge Pan continued that she did not “see the connection between this rule, regulating these markets, and problems with election integrity.” A decision that the CFTC has not shown irreparable harm would alleviate the need for expedited consideration of the merits. One thing is for sure: the D.C. Circuit is poised to issue a decision before the congressional elections.