Kalshi faces CFTC scrutiny over contract self-certification

The U.S. Commodity Futures Trading Commission (CFTC) is investigating Kalshi’s use of contract self-certification, and the matter could lead to enforcement action, according to the report. The inquiry’s scope remains unspecified: no filing, penalty or deadline was disclosed, and the report does not identify which Kalshi contracts triggered it.

An unidentified woman said Kalshi was already working to address the issue, though the source gives neither her name nor the exact problem she described. Kalshi maintains that its offerings are “traditional derivatives products rather than wagers,” a distinction at the center of the debate over how prediction markets should be regulated. That position does not resolve whether the company’s certifications met CFTC requirements.

What is the CFTC examining?

Under the self-certification process, regulated exchanges can begin offering new contracts as early as the following day after certifying that they meet CFTC requirements, including rules designed to prevent market manipulation. Exchanges do not need explicit agency approval, so an enforcement case would likely focus on certification and launch rather than the absence of prior permission.

In July, the CFTC warned operators against using overly broad language when self-certifying new products. The report does not say whether Kalshi received that warning, which products were at issue or whether the agency has alleged manipulation.

CME Group CEO Terry Duffy has previously raised concerns about prediction market contracts that he believes could be vulnerable to manipulation. His position brings established derivatives-market scrutiny into the debate, although no specific case of manipulation appears in the report. The practical issue remains the certification process, not a proven finding of manipulation.

How large has prediction-market growth become?

Prediction markets have expanded rapidly since Donald Trump’s election. Kalshi and rival Polymarket have reported valuations of $40 billion and $21 billion, respectively, leaving Kalshi’s figure about $19 billion higher and nearly twice Polymarket’s.

Those figures represent reported company valuations, not trading volume, customer funds or revenue, and no valuation date was provided. The expansion has been helped in part by a more welcoming CFTC approach, particularly under current agency leadership; the inquiry now makes that relationship less predictable.

Who else faces regulatory scrutiny?

Washington faces growing pressure to examine the sector more closely. Following their midterm victories, Democrats are preparing tougher oversight in the next Congress, while Polymarket also faces a broad CFTC investigation.

That probe reportedly asks whether the platform breached a 2022 settlement requiring it to block access for U.S. users. Investigating possible noncompliance would reopen the issue of market access without proving a breach, while Kalshi’s review could establish how much scrutiny exchanges face when they launch products through certification rather than prior approval.

What does the trader-loss research show?

Galaxy Research analyzed on-chain trading activity from 2.9 million human-paced Polymarket accounts, covering positions, entry prices, holding periods and payouts. Researchers excluded accounts they believed were automated, which narrows the sample but does not eliminate classification error.

More than 69% of the studied accounts finished below break-even, and Galaxy said traders collectively recorded $338.9 million in losses. The median retail account lost about $3, indicating that many participants incurred small losses, although some lost thousands of dollars.

Topic specialists were slightly less likely to profit than traders who spread positions across different subjects: 28% of specialists finished profitably, compared with 30.4% of generalists. Sports-focused traders performed worst, while technology and science specialists recorded better results.

These are on-chain account findings, not evidence that every Polymarket customer lost money. The study also does not isolate why losses occurred or show how results compare with another period. The strongest conclusion is narrow: most sampled accounts ended below break-even.

What could change next?

No enforcement deadline, settlement timetable or congressional hearing date appears in the report. The next concrete markers would be a disclosed CFTC enforcement filing, identification of the contracts and certification language under review, or a formal oversight plan from Democrats in the next Congress.

Until one of those steps occurs, the verified conclusion is narrower: regulators are testing the boundary between rapid product launches and substantive review. No operational change has a published date.

The near-term implication is a greater need for exchanges to narrow self-certification language, though no sanction has been announced. Without a disclosed enforcement window, the next hard test is whether the CFTC files an action or Congress opens oversight in the next legislative session.