A federal judge "erred" in allowing Kalshi, a prediction market firm, to list and trade election-related contracts, as argued by attorneys for the U.S. Commodity Futures Trading Commission (CFTC) in a brief submitted to an appellate court on Wednesday.

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The CFTC reaffirmed prior arguments made in a lower court, stating that the district court judge overseeing Kalshi's litigation against the CFTC mishandled definitions under the Commodity Exchange Act.

In a detailed filing, the CFTC noted that the lower court's ruling improperly restricted the agency from reviewing transactions related to gaming, asserting that more rigorous definitions were necessary for evaluating Kalshi's market.

The appeals court previously ruled that the CFTC did not sufficiently demonstrate potential irreversible damages, allowing Kalshi to proceed with a number of event contracts linked to the upcoming 2024 elections.

Kalshi currently has contracts open for betting on various electoral outcomes, including presidential election results and state-specific victories. This decision allows Kalshi to offer contracts that fall into areas historically viewed as betting markets, raising regulatory concerns.

Furthermore, the CFTC highlighted that Kalshi's marketing strategies exhibit tendencies akin to sports bets, blurring the lines of regulatory oversight.

With Kalshi's entrance into the betting market, it has the potential to significantly impact how electoral outcomes are speculated in the current political climate. As the political landscape evolves, scrutiny over Kalshi's activities is expected to intensify.