CFTC Warns Kalshi It Could Face Charges

The Commodity Futures Trading Commission has warned Kalshi that it could face charges over how it told the agency about new contracts, Politico reported on Tuesday, November 10. The probe asks whether the leading US prediction market properly notified its own federal regulator before listing products, the paperwork that every exchange’s legal standing rests on.

Kalshi confirmed the investigation to CNBC on Wednesday and said it is working with the CFTC to fix the problem. No charges have been filed. Everything about the case so far comes from Politico’s source, a person with direct knowledge of the probe, and from Kalshi itself.

Dozens of Products or a Handful

The two sides of the story don’t describe the same thing. According to Reuters, Politico reported that the CFTC is looking at whether Kalshi failed to properly notify the agency about dozens of new products, and that the warning suggests charges could come soon.

Kalshi’s account is much smaller. Elisabeth Diana, Kalshi’s head of communications, told CNBC: “The notice 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.”

Weather Contracts Were Flagged

Kalshi told CNBC that the CFTC flagged weather-related contracts. It didn’t say when the agency started looking, and it declined to comment on any possible charges. The CFTC didn’t respond to CNBC’s request for comment, and its press releases through November 9 announce no action against the company.

How Self-Certification Works

The rules at stake are about self-certification. Under the Commodity Exchange Act and CFTC Rule 40.2, an exchange doesn’t need the agency’s approval to list a new contract. It files a certification that the contract complies with the law, and the CFTC must receive it “by the open of business on the business day preceding” the listing. That speed is the point. It’s how a platform can put up a new market almost overnight.

There is a catch. The filing has to carry the contract’s terms and an explanation of how it complies, and Rule 40.2(d) lets the CFTC order an exchange to withdraw a group filing and submit contracts one by one.

The July Warning

The agency had already complained about how exchanges were using the system. On July 24, the CFTC’s Division of Market Oversight issued Staff Letter No. 26-22, an advisory to designated contract markets about what it called “Broad Template Certifications.” It said exchanges were bundling contract variations “with differing settlement sources and/or methodologies under a single certification.”

Staff said the practice “hampers DMO’s ability to determine whether a DCM has supplied all information, explanation, and analysis” the rule requires. The letter told exchanges that broad templates “should not be submitted” and pointed out that staff had raised the same concern in March, in Staff Letter No. 26-08. The advisory names no exchange.

The Regulator in Kalshi’s Corner

The timing is awkward for both sides, because the CFTC is fighting states in court on Kalshi’s behalf. On October 27 it announced a lawsuit against Utah to stop the state shutting down federally registered exchanges. A day later Utah filed criminal charges against Kalshi and its co-founders, Tarek Mansour and Luana Lopes Lara. The agency says it has started legal proceedings against nine other states too.

CFTC Chairman Michael S. Selig said in the Utah release that Congress “entrusted the CFTC to be the federal regulator with sole responsibility to oversee these markets.” On November 5 his agency went further and told exchanges to stop blocking traders by state within 30 days.

Why the Filings Matter

Kalshi’s whole defense in those fights with the states is that it’s a CFTC-regulated exchange that answers to Washington, not to state gaming boards. A federal case about how it handles its CFTC filings goes to the heart of that argument, even if Kalshi turns out to be right that it’s a small paperwork slip.

It also isn’t the first time the agency has stepped in. In August the CFTC ordered Kalshi to take down sports-related mention markets, where traders bet on what someone will say during a broadcast or speech, while it looked into that contract type.

The scrutiny is building in Congress as well. Democrats take control in January, and Rep. Ro Khanna of California posted on X on Tuesday calling for a ban on sports prediction markets, which CNBC says account for the overwhelming majority of volume on the leading platforms.