At a glance

  • The Commodity Futures Trading Commission (CFTC) is investigating whether Kalshi properly notified it of new event contracts, the prediction market confirmed to CNBC on Wednesday. Kalshi describes the issue as “a procedural error involving the submission of a handful of contracts, many of which weren’t live”.
  • Politico and Reuters reported on Tuesday, each citing a single person familiar with the matter, that the agency had warned Kalshi that charges could come soon. The CFTC has not commented, and no charges have been filed.

Kalshi said the CFTC had flagged weather-related contracts, CNBC reported. It did not say when the investigation began, and it declined to comment on possible charges. CNBC discloses that it has a commercial relationship with Kalshi, including a minority investment.

What the CFTC is examining

A regulated exchange such as Kalshi does not need the CFTC’s approval to list a new contract. It can self-certify: it files the contract with the agency and certifies that it complies with the Commodity Exchange Act. That route is what lets prediction markets add new markets quickly.

The probe concerns whether Kalshi gave the agency proper notice of dozens of new products, Politico and Reuters reported. Politico added that the agency’s private warning suggests charges could arrive soon, although the matter could also end in a settlement.

The two accounts differ on scale. The sources speak of dozens of products; Kalshi speaks of a handful of contracts, many never live.

Neither has published a list.

What Kalshi says

“We are already addressing the issue,” Kalshi spokesperson Elisabeth Diana said in the statement given to Reuters, Politico and Bloomberg Law. Kalshi does not regard its products as wagers but as conventional derivatives, Politico reported.

Why it matters

Until now the CFTC has mostly stood beside Kalshi in its fights with the states. Last month the CFTC and the Justice Department sued Utah to stop that state’s case against the company, after Utah filed criminal charges against Kalshi and its co-founders. This probe is about Kalshi’s own paperwork with its federal regulator.

It is not the first time the agency has stepped in. In August it told Kalshi to remove sports “mention markets” while it reviewed that type of contract, CNBC reported, and it is also running a broad investigation into rival Polymarket.

The pressure comes as Kalshi grows: it closed its $1 billion funding round at a $40 billion valuation late last month. On Tuesday, separately, a New York federal judge denied Novig an injunction against state gambling enforcement.

What happens next

The next step belongs to the CFTC: it can file charges, settle, or drop the matter. No date has been set or reported, and the agency did not respond to requests for comment from CNBC or Reuters. Any action would be announced on the CFTC’s enforcement press-release page.

This article is for information only and is not investment advice.