Kalshi Could Be in Serious Trouble as CFTC Threatens Possible Enforcement Action

The federal regulator has reportedly been investigating the matter for months, with Politico reporting that the CFTC warned Kalshi that charges could be coming over allegations it failed to notify the agency about dozens of products it had planned to launch.

A settlement remains a possibility, but the warning suggests the investigation could soon escalate into formal enforcement action.

Company disputes claims

Kalshi is playing down the issue, stating that its regulatory dispute involves a procedural matter. Company spokesperson Elisabeth Diana described the CFTC’s warning as a procedural issue involving the submission of a handful of contracts, many of which had not even gone live.

She added that the company was already working to address the issue.

Regulatory scrutiny intensifies

The investigation comes as Washington faces growing pressure to take a closer look at the prediction market sector. Following their midterm victories, Democrats are preparing for tougher oversight in the next Congress, while Polymarket is also facing a broad CFTC investigation.

That probe reportedly includes questions about whether the platform breached a 2022 settlement requiring it to block access for US users.

For Kalshi, one of the main issues under examination is the self-certification process used by regulated exchanges to introduce new products. Under this system, exchanges can begin offering new contracts as early as the following day after certifying that they meet CFTC requirements.

However, the process has attracted criticism from major Wall Street players. CME Group CEO Terry Duffy has previously raised concerns about prediction market contracts that he believes could be vulnerable to manipulation.

Industry faces broader challenges

The regulatory questions surrounding prediction markets are not the only concern facing the industry, as research suggests that making money on these platforms may be harder than many retail traders expect.

A recent Galaxy Research study examining 2.9 million human-paced accounts on Polymarket found that more than 69% finished below break-even, and traders collectively recorded $338.9 million in losses.

The study analyzed on-chain trading activity, including positions, entry prices, holding periods, and payouts, while excluding accounts believed to be automated.

The median retail account lost around $3, which could mean that most traders suffered relatively small losses, although some were down thousands of dollars.