The Commodity Futures Trading Commission (CFTC) will extend the comment period for its proposed ban on election bets to 8 August.
The CFTC said it is providing the extension to allow interested parties time to analyse the proposal and prepare comments.
The agency has been battling with prediction market operators for years over the legality of events contracts.
This culminated in May when the derivatives regulator proposed a rule to ban the trades completely, which have seen bets placed on political results and other real-world events such as award shows.
The proposed rules would classify events contracts as gaming, preventing these from being traded through CFTC-registered entities.
The move would kill prediction markets such as Kalshi and PredictIt, which rely on their CFTC-regulated status to operate.
While it does not offer bets on political outcomes itself, Kalshi does so on other real world events.
CFTC chairman Rostin Behnam said in May there has been a significant increase in the number of events contracts offered since 2021.
Behnam argued the contracts fail to serve the economic purpose of futures markets and are illegal in several states.
He said: “This is not a new phenomenon for the CFTC. Over the course of the last 20 years, the CFTC has remained steadfast — through many administrations — that election or political contracts should not be allowed on the US futures and options markets.
“Contracts involving political events ultimately commoditise and degrade the integrity of the uniquely American experience of participating in the democratic electoral process.
“Allowing these contracts would push the CFTC, a financial market regulator, into a position far beyond its Congressional mandate and expertise. To be blunt, such contracts would put the CFTC in the role of an election cop.”
Prediction markets challenge CFTC in court
Both Kalshi and New Zealand-based PredictIt are engaged in litigation against the derivatives regulator.
PredictIt opted to sue the CFTC in November 2022, after the regulator withdrew its “no action” letter that had provided the legal cover for it to operate.
The US Fifth Circuit sided with the prediction market in July 2023, arguing the letter had represented a licence under the Administrative Procedure Act (APA).
As such, the decision to withdraw the letter was reviewable by the court.
The case has since been referred to the DC District Court where litigation is ongoing.
Meanwhile, Kalshi opted to challenge the CFTC rule banning event contracts, including election bets.
In a complaint filed in November 2023, the prediction market argued the CFTC’s attempt to do so exceeded its statutory authority.
The company argued in the complaint: “At bottom, it is undeniable that election outcomes have consequences for everyone; they play a pivotal role in determining our collective future.
“Allowing people to trade safely on election outcomes will give them the freedom to protect their financial interests.
“A legitimate market will also yield more credible and transparent election forecasting, especially relative to the bias of polling.”