Prediction market giant in CFTC's crosshairs! Kalshi reportedly accused of product notification violations, charges may land soon.

The U.S. Commodity Futures Trading Commission (CFTC) has warned prediction market startup Kalshi that it is preparing to file a lawsuit, according to people familiar with the matter on Tuesday. The investigation concerns whether dozens of the platform's new products were properly reported to regulators as required. The regulator's notice means the related charges will be formally brought soon, said the person, who requested anonymity because the decision has not been made public. Kalshi said in a statement that the CFTC's warning "relates only to paperwork lapses in the reporting process for a small number of contracts, most of which were never listed for trading." The company added: "We have already begun remediating the issue." The CFTC did not immediately respond to a request for comment. Kalshi won a lawsuit against the CFTC in 2024, gaining approval to list various event-based derivatives, after which the platform's product lineup expanded rapidly. But Kalshi and peers such as Polymarket have long been controversial: critics argue such products are essentially akin to gambling and prone to inducing addictive behavior. In recent months, Kalshi has embarked on an expansion strategy, seeking to compete head-on with traditional exchanges such as CME Group Inc. Class A (CME.US) and Intercontinental Exchange, Inc. (ICE.US), the parent of the NYSE. The platform is no longer limited to event contracts and has expanded into multiple asset classes through perpetual futures. Perpetual futures, commonly known in the industry as "perps," are derivative contracts with no expiration date. Traders can hold positions indefinitely without rolling them over; the instrument generally supports high leverage, amplifying swings in both gains and losses. Late last month, Kalshi completed a funding round co-led by Sequoia Capital and Wellington, raising US$1 billion at a post-money valuation of US$40 billion. The financing underscores the continued surge in popularity of such markets and strong institutional interest.