CFTC weighs sanctions over Kalshi contract-reporting allegations

The Commodity Futures Trading Commission is weighing sanctions against Kalshi over allegations that the prediction-market operator failed to follow procedures for reporting dozens of new event contracts. Reports published Nov. 10 said the inquiry had been under way for months and concerned products that were still being developed, as well as whether Kalshi made required notifications when listing contracts.

No decision had been made on whether to penalise Kalshi or what form any sanction might take. Kalshi acknowledged the regulatory scrutiny but disputed the scale of the issue. Elisabeth Diana, a company spokesperson, described it as “a procedural error involving the submission of a handful of contracts, many of which weren’t live,” and said the company was already addressing it.

The dispute concerns the CFTC’s self-certification regime, which permits a designated contract market to introduce a product without advance agency approval. An exchange must certify that the contract meets applicable requirements and submit the information through prescribed procedures; trading may begin as soon as the following day.

Kalshi obtained its designation as a CFTC-regulated contract market in November 2020. Its event contracts are treated as swaps under the Commodity Exchange Act, placing the platform within the agency’s derivatives-market framework.

The reporting inquiry arrived alongside a broader CFTC push to tighten the information exchanges provide when self-certifying event contracts. In guidance released Nov. 10, the agency’s Division of Market Oversight said broad, template-style filings that combine multiple potential contract variations should not be submitted. Such filings can impede the agency’s ability to assess settlement methods, data sources and compliance with core principles before a contract is listed.

CFTC staff had warned in July that some exchanges were bundling contract permutations with differing settlement sources or methodologies into a single certification. The agency said that practice made it harder to determine whether the contracts met regulatory standards, including protection against manipulation.

The Division of Enforcement also issued a separate prediction-markets advisory on Nov. 10 after two public cases involving misuse of nonpublic information and fraud on KalshiEX. It said designated contract markets have independent obligations under the Commodity Exchange Act to preserve audit trails, conduct surveillance and enforce rules against prohibited trading practices. That advisory did not address the alleged contract-reporting failures.

The possible action against Kalshi comes as scrutiny of the sector’s self-certification system has grown, particularly as platforms expanded into sports, elections and government-policy contracts. Democrats were preparing to increase congressional oversight when the next Congress convened, while industry critics have argued that some contracts may be vulnerable to manipulation.