U.S. prediction market platform Kalshi may face enforcement action from the U.S. Commodity Futures Trading Commission (CFTC). According to a report by Politico on Tuesday, the CFTC has sent a private notice to Kalshi, warning the company that it may be charged for failing to notify new products in compliance with regulations. The relevant investigation has lasted for several months and involved dozens of prediction market contracts.
CFTC launches investigation into Kalshi
According to people familiar with the matter, the CFTC is currently investigating Kalshi’s declaration and notification procedures for multiple new products and examining whether the company has fully fulfilled relevant regulatory obligations. The notice issued to Kalshi by the regulatory agency indicated that further enforcement measures may be taken in the future.
In response, Kalshi spokesperson Elisabeth Diana told Politico that the relevant issues were procedural errors involving the declaration of a small number of contracts, many of which had never even been officially launched. She emphasized that the company has already started to deal with relevant issues.
The investigation comes at a time when the CFTC is actively seeking regulatory authority over prediction markets. The prediction market has developed rapidly in recent years. The platform allows users to trade on political elections, economic data and the results of various events. However, whether its products should be classified as derivatives subject to federal supervision or managed by states in accordance with gambling-related laws has become a focus of controversy between US regulators and state governments.
The CFTC asserts that it has exclusive regulatory authority over prediction markets and continues to challenge some state governments’ attempts to regulate Kalshi. The possible enforcement action against Kalshi this time also reflects that regulatory agencies are strengthening their review of the platform’s product declaration procedures.
Kalshi joins forces with Coinbase to support CFTC regulatory authority
It is worth noting that although Kalshi may face a CFTC investigation, he also supports the agency’s position in another legal dispute.
Kalshi filed a joint application with Coinbase and four other companies on Monday, hoping to be allowed to submit a court opinion supporting the CFTC’s regulatory stance on perpetual futures products linked to the stocks of individual U.S. listed companies.
This legal dispute involves the CFTC’s jurisdiction over new derivatives, and is also closely related to the regulatory authority of prediction markets and other on-chain financial products.
Overall, while the CFTC continues to defend the federal level’s regulatory authority over prediction markets through litigation, it has also begun to review the platform’s own product declaration and compliance procedures. As the prediction market business expands, how the platform obtains compliance space between federal supervision and state laws will become an important issue in the subsequent development of the U.S. market.
