The Commodity Futures Trading Commission is investigating whether prediction market platform Kalsi failed to properly notify regulators about the proposed event contract, Kalsi confirmed to CNBC.
Kalsi said this is a minor issue in how the contract was submitted and that he is working with the CFTC to address the issue. Carsi said the CFTC issued a warning on weather-related contracts. The leading prediction market platform did not say when authorities began investigating Mr. Kalsi. The CFTC did not respond to requests for comment.
Politico first reported on the investigation on Tuesday, noting that charges could be filed soon based on the CFTC’s private notice to Carsi. The platform declined to comment on possible charges.
Prediction market platforms are permitted to self-certify event contracts without prior approval from federal agencies as long as they comply with the Commodity Exchange Act. Self-certification enables rapid implementation of new contracts.
“Procedural error”
“This notice relates to procedural errors involving the submission of a small number of contracts, many of which were never actually completed,” said Elizabeth Diana, head of communications at Karsi. “We are already working on this issue.”
The move is the latest move by the CFTC to rein in prediction markets, which face growing scrutiny from regulators and members of Congress in Washington.
In August, the CFTC ordered Calci to eliminate sports-related “mention markets,” where speculators can trade based on what they say on broadcasts or speeches, while investigating types of event contracts.
The agency is also conducting a wide-ranging investigation into competitor Polymarket, including investigating whether the company violated a 2022 settlement with the CFTC that bars U.S. traders from accessing its international trading platform. Polymarket’s domestic exchanges operate separately from the global platform.
Prediction markets are also expected to face increased scrutiny when a Democratic Congress is sworn into office in January. Rep. Ro Khanna, D-Calif., called for a ban on sports prediction markets, which dominate major platforms by volume, in a Tuesday social media post about X.
Disclosure: CNBC and Kalsi have a commercial relationship that includes customer acquisition and minority ownership.
