The U.S. Commodity Futures Trading Commission (CFTC) has privately notified prediction market platform Kalshi of imminent enforcement charges related to its product notification process, according to a person familiar with the matter. The warning, reported Tuesday, suggests formal action could follow soon, though no public announcement has been made.
Kalshi confirmed receipt of the CFTC’s notification in a statement, calling the issue a procedural error involving the submission of a handful of contracts, many of which were not yet active. The company stated it is already addressing the matter. A CFTC spokesperson did not immediately respond to requests for comment.
The probe centers on whether Kalshi properly notified the regulator about dozens of new products launched in recent months. This follows a 2024 legal victory that allowed Kalshi to expand its event-based derivatives offerings, including contracts tied to political events, sports, and other outcomes. The company has since broadened its strategy to compete with traditional exchanges like CME Group and Intercontinental Exchange by introducing perpetual futures—derivatives without expiry dates that can involve high leverage.
Kalshi’s rapid growth has been underscored by a $1 billion funding round at a $40 billion valuation, co-led by Sequoia Capital and Wellington Management, reflecting strong institutional interest in prediction markets. However, critics argue such platforms resemble gambling and could encourage addictive trading behavior.
Polymarket, another major prediction market operator, faces parallel scrutiny. The CFTC is investigating whether Polymarket violated terms of a 2022 settlement that barred U.S. users from accessing its international exchange. The agency is also examining Polymarket’s advertising practices and broader compliance, according to prior reports.
Polymarket has seen its own surge in activity, reporting $1.8 billion in annualized revenue as of November, up from over $1 billion in June. The growth stems from its U.S.-focused exchange, which recorded $14.5 billion in notional volume in October, driven by high-profile events like the FIFA World Cup and NFL season. Combo event contracts—similar to sportsbook parlays—accounted for over 70% of trading volume on some days.
Despite its expansion, Polymarket acknowledged regulatory headwinds, including potential scrutiny from a Democratic-controlled Congress. The company has stated it welcomes oversight, emphasizing collaboration with lawmakers as the industry evolves.
The CFTC’s dual probes into Kalshi and Polymarket mark a shift in regulatory posture toward prediction markets, which have flourished under a more permissive approach in recent years. The outcomes of these investigations could set precedents for how such platforms operate in the U.S., balancing innovation with consumer protection.