The Commodity Futures Trading Commission (CFTC) has privately warned prediction market Kalshi that charges could come soon. The probe examines whether Kalshi, valued at $40 billion, failed to properly notify the agency about dozens of new products.
Kalshi calls it a procedural error. However, much of the growth behind its valuation, and Polymarket’s $21 billion, traces to a CFTC that backed expansion.
Why Is the Kalshi CFTC Probe Focused on Self-Certification?
A person with direct knowledge of the case told POLITICO the inquiry has run for months. The person requested anonymity.
Only a handful of contracts are involved, and many were not live, Kalshi spokesperson Elisabeth Diana said.
“We are already addressing the issue.”
Elisabeth Diana, Kalshi spokesperson, via POLITICO
A CFTC spokesperson did not immediately respond to POLITICO’s request for comment.
Self-certification lets exchanges list products as soon as the next day without express CFTC approval. Operators attest that contracts meet CFTC requirements, including low risk of manipulation.
Listings range from oil-price derivatives to a wager on whether Defense Secretary Pete Hegseth faces impeachment.
Earlier this year, CME Group CEO Terry Duffy warned that some wagers risked manipulation and should not have gone live.
In July, the CFTC’s market oversight division issued an advisory against filing one sweeping certification for many contracts.
Is Washington’s Patience With Prediction Markets Running Out?
Prediction markets have surged since Donald Trump’s election two years ago, led by Kalshi and Polymarket.
Meanwhile, the CFTC is also investigating Polymarket, partly over whether it broke a 2022 settlement that required blocking U.S. users.
Democrats plan to scrutinize the industry in the next Congress after their midterm wins.
Kalshi CEO Tarek Mansour has pitched insider trading rules for Congress and administration officials.
Still, the CFTC under Chair Michael Selig backs prediction markets against state officials alleging gambling law violations. Charges could signal stricter listing rules behind that backing. A narrow procedural outcome would point the other way.
