Kalshi says CFTC flagged weather contracts in filing probe, calls it a procedural error

Kalshi has confirmed that the Commodity Futures Trading Commission is investigating whether it failed to properly inform the agency of proposed event contracts, and has named the kind of product involved: weather-related contracts, which the company says the CFTC flagged. CNBC reported the confirmation on Wednesday, Nov. 11.

Kalshi described the matter to CNBC as a minor issue in how the contracts were filed and is working with the CFTC to address it.

“The notice is about a procedural error involving the submission of a handful of contracts, many of which weren’t live,” said Elisabeth Diana, Kalshi’s head of communications. “We are already addressing the issue.”

Kalshi did not say when the agency began investigating, and it declined to comment on any possible charges. The CFTC didn’t immediately respond to CNBC’s request for comment. CNBC discloses that it and Kalshi have a commercial relationship that includes customer acquisition and a minority investment.

A handful, or dozens

The company’s account now sits beside a larger number. Politico first reported the probe on Tuesday, Nov. 10. Reuters reported the same day, citing a person familiar with the matter, that the CFTC had warned Kalshi of imminent charges in a probe into whether it properly notified the agency about dozens of new products, as EventMarkets covered.

Kalshi’s own figure is “a handful of contracts.” Tuesday’s reports and Kalshi’s statement did not identify which contracts were involved, so the weather detail is new. No record opened so far shows whether the dozens of products in Reuters’ account and the handful in Kalshi’s refer to the same filings, how many of the weather contracts were ever listed, or what they covered.

The CFTC has not announced anything on the matter. Its press releases page lists no action against Kalshi as of Nov. 11; its latest release, dated Nov. 9, concerns eight individuals acting as unregistered associated persons of foreign introducing brokers. No charges have been made public, and the probe remains an investigation, not a finding.

What the filing rule covers

Exchanges can self-certify event contracts without the CFTC’s prior approval, as long as the contracts comply with the Commodity Exchange Act. That allows faster introduction of new contracts.

The governing rule, Regulation 40.2, sets conditions an exchange must meet “prior to listing a product for trading” that has not been approved under Regulation 40.3. Among them, the Commission must receive the submission by the open of business on the business day before the product lists. Our earlier story set out the rule’s filing requirements.

Two parts of the rule matter for reading Kalshi’s account. The requirements are written around listing, and Kalshi’s statement says many of the contracts at issue weren’t live; no record opened shows how the CFTC treats a filing problem on a contract that wasn’t live. Separately, the rule lets the Commission stay a contract’s listing while proceedings for filing a false certification are pending, a decision it cannot delegate to staff. No record shows any stay, or any such proceeding, involving Kalshi.

Where it fits

CNBC puts the probe in a run of CFTC moves on prediction markets. In August the agency ordered Kalshi to take down sports-related “mention markets,” where traders can trade on what individuals will say in a broadcast or speech, while it looked into that contract type. It is also conducting a broad probe of Polymarket that includes whether the company violated a 2022 settlement barring U.S. traders from its international platform; Polymarket’s domestic exchange operates separately.

On Nov. 5 the CFTC issued an interpretation that blocking traders by state breaks its impartial-access rules.

Prediction markets also face growing scrutiny from members of Congress, and CNBC reports that it is expected to intensify once the Democratic Congress is sworn in in January. On Tuesday, Rep. Ro Khanna, D-Calif., called on X for a ban on sports prediction markets, which account for the overwhelming majority of volume on leading platforms.

For traders, the record is narrow. There is a CFTC investigation and a private notice; Kalshi’s statement that the agency flagged weather contracts and that many of the contracts weren’t live; and, as of Nov. 11, no public charge and no record of any contract being halted.

Our AI news desk researched and wrote this article, and software checked every factual sentence against the records it links to, following the WriterOps methodology. Report an error.