A top federal financial regulator has warned Kalshi of potentially imminent charges tied to the launch of certain wagers by the prediction market giant, a person with direct knowledge of the probe said.
The Commodity Futures Trading Commission is investigating whether Kalshi failed to properly notify the agency about dozens of new products that were in the works, said the person, who was granted anonymity to discuss the unannounced enforcement activity. The agency’s private notification to Kalshi suggests the charges could land soon.
Kalshi spokesperson Elisabeth Diana said in a statement that the CFTC’s warning “is about a procedural error involving the submission of a handful of contracts, many of which weren’t live.”
“We are already addressing the issue,” she added.
A CFTC spokesperson did not immediately respond to a request for comment.
Prediction markets have been on a blistering rise since President Donald Trump’s election two years ago. Kalshi and Polymarket, the leading names in the industry, now boast valuations of $40 billion and $21 billion, respectively. And much of their ability to grow — in size, in new products and in areas like U.S. politics and sports — has come thanks to the CFTC’s friendlier approach to the markets.
Yet the Kalshi probe underscores the shifting winds around the prediction markets in Washington.
Democrats, fresh off their midterm sweep, are already gearing up to aggressively oversee the industry in the next Congress. And Kalshi isn’t the only platform coming under new pressure from the Michael Selig-led CFTC: Polymarket is also the subject of a sweeping investigation by the agency, POLITICO and other media outlets have previously reported. The CFTC is looking into, among other things, whether Polymarket violated the terms of a 2022 settlement deal requiring it to close off its platform to US users.
The Kalshi investigation has been in the works for months, the person said. And while Selig’s CFTC has aggressively embraced the prediction markets — particularly in their legal fight against a group of state officials who allege the companies are violating existing gambling laws — it marks fresh scrutiny that the agency is now dialing up on those companies.
One particular focus has been the so-called self-certification process, which CFTC-regulated financial exchanges regularly use to quickly take products live — whether they be complex derivatives contracts tied to the price of oil or a prediction market on Defense Secretary Pete Hegseth’s possible impeachment.
Exchanges are able to use the self-certification process to begin offering trading in new products as soon as the next day, as long as they attest to the CFTC that the products comply with certain requirements. Those include that they are not at risk of being easily manipulated. The CFTC’s express approval is not required.
But the self-certification process has drawn the ire of Wall Street titans like CME Group CEO Terry Duffy, who earlier this year sounded the alarm about a rising tide of prediction market wagers that, in his eyes, were at risk of manipulation and shouldn’t have been allowed to go live. In July, the CFTC warned prediction market operators against using overly broad language when certifying new products.
This story originally appeared on POLITICO and is courtesy of the Axel Springer Global Reporters Network, which harnesses the resources of the company’s newsrooms to publish ambitious scoops, investigations, interviews, opinion pieces, and analysis. It allows journalists — including those from POLITICO, Business Insider, WELT, BILD, Onet, and Fakt — to collaborate on major stories for an international audience of hundreds of millions across platforms.
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