After the U.S. Commodity Futures Trading Commission's court defeat last week in the agency's pursuit of Kalshi's election contracts, the regulator's chairman, Rostin Behnam, said it will still keep pursuing the case against what it continues to contend is illegal activity.

"This is a situation that we think is against the law," Behnam said at a financial policy event at Georgetown University's Psaros Center for Financial Markets and Policy. "We will continue to make that case."

Federal Judge Jia Cobb of the District of Columbia court ruled last week that the CFTC exceeded its authority by banning Kalshi from listing U.S. political prediction markets, basically bets on which party might control the House of Representatives or win the White House in any given term. Then a U.S. federal appeals court halted Kalshi's brand-new political prediction markets when the CFTC asked for an emergency stay (a hearing is scheduled for Thursday).

Read More: Kalshi's New Political Prediction Markets Halted as CFTC Appeals Loss

Behnam reiterated that having the CFTC policing U.S. elections in cases of market manipulation is a dangerous road. The agency is in the middle of a rulemaking process that would institute a blanket ban on prediction markets from its regulated businesses.

If users find election betting useful, the chairman said that it should be overseen elsewhere.

"If folks really want to see these markets emerge, scale and develop ... it should be done at the state level within the gambling industry," Behnam said.

Edited by Nikhilesh De.