CFTC Warns Kalshi of Imminent Charges Over Contract Notices
The CFTC has privately warned Kalshi of possible charges over how it notified the agency about new products, Politico reported. A source says dozens of products are involved; Kalshi says a handful, many never live, and that it is already addressing the issue.
Kalshi, the prediction markets operator that has spent the autumn arguing that federal regulators alone should oversee its business, has now been warned by those same regulators that charges could be coming. The US Commodity Futures Trading Commission told the company it could face charges over whether it properly notified the agency about new products, Politico reported Tuesday, November 10.
According to the report, which cites a person with direct knowledge of the probe, the CFTC is examining notifications tied to dozens of products. The person said the investigation has been underway for months, and that the agency's private notification to Kalshi suggests charges could follow. No CFTC statement is quoted, so the account rests on one anonymous source and Kalshi's response.
Kalshi disputes the scale. Spokesperson Elisabeth Diana described the matter as a procedural error involving submissions for a handful of contracts, many of which never went live.
"We are already addressing the issue,"
Elisabeth Diana, Kalshi spokesperson
The gap between "dozens" and "a handful" is the central open question. The dispute turns on how many products were affected, and on whether Kalshi's account of a procedural slip, much of it involving contracts that never went live, holds up against the source's description of a probe that has run for months.
The timing is awkward for both sides. The CFTC is fighting to establish exclusive federal authority over prediction markets, including by challenging state efforts to regulate Kalshi. Utah filed 14 criminal charges against Kalshi and its founders on October 28, a day after the CFTC sued the state over jurisdiction. Arkansas followed on November 4, when its attorney general sued Kalshi over sports event contracts, while Kalshi and the CFTC argue that prediction markets fall under exclusive federal oversight.
The two are also aligned elsewhere. On Monday, Kalshi joined Coinbase and four other firms in seeking permission to file a brief supporting the CFTC's treatment of perpetual futures tied to individual US stocks. That follows the agency's statement that such products can trade on US exchanges registered with both the CFTC and SEC.
For the wider market, the episode shows the awkward position of a company whose answer to state prosecutors is that prediction markets belong under exclusive federal oversight. Kalshi closed a $1 billion Series G at a $40 billion valuation in late October, and a federal enforcement action over notification practices, even a procedural one, could give state regulators an argument that federal oversight is not airtight. Whether charges materialize, and how many contracts they cover, will determine how much weight that argument carries.
