Kalshi has moved to bolster confidence in prediction markets by expanding enforcement and preparing to publish disciplinary actions against users, and the company’s new Head of Enforcement has spent months clearing a backlog of potential trading violations.
Key Takeaways
- Kalshi is prepared to disclose disciplinary actions after working through a backlog of potential violations.
- The platform's enforcement lead said trust, not hype, drove participation and trading volume.
- Kalshi has reportedly generated about $42.7 billion in cumulative trading volume.
Kalshi said it is working to strengthen its internal controls to curb trading that could give some users an unfair edge. Robert DeNault, who was recently appointed to lead enforcement at the company, said that after reviewing the potential violations, a series of disciplinary notices will soon be shared publicly.
The effort is partly intended to respond to recent high-profile payouts that have raised questions about whether some participants in prediction markets have leveraged privileged insight to profit.
An example that attracted attention involved a large payout on rival platform Polymarket tied to the capture of Nicolás Maduro, an outcome that critics said looked suspicious, and led to outcry among lawmakers.
Kalshi said it already bans insider trading in its rulebook. It added that it is working to align its compliance procedures with the standards set by established exchanges such as the New York Stock Exchange and Nasdaq.
A central focus of Kalshi’s enforcement work is identifying and excluding “source agency” trades, where a user has a direct connection to the entity responsible for settling a contract. DeNault said the company issues notices for violations even if the trader did not ultimately profit, aiming to deter activities that could erode confidence in market fairness.
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CFTC warns states it will fight preemption battles
As Kalshi strengthens its compliance framework, Commodity Futures Trading Commission (CFTC) Chairman Michael Selig signaled that the federal regulator would more aggressively defend its oversight of prediction markets. He indicated that the agency would not defer to states seeking to impose their own restrictions on event contracts.
Writing in a Wall Street Journal co-ed, Selig stated that the CFTC has historically exercised authority over prediction markets, including determining whether event-based contracts fall within federal commodities law rather than state gambling statutes. He pointed to nearly 50 ongoing court disputes involving such platforms and said the commission intended to push back against what it viewed as state overreach.
Selig argued that event contracts perform valid economic purposes and are structured as swaps under CFTC regulations, not as gambling products.
He also said he was prepared to pursue clearer regulatory standards for prediction markets and to reassess how the agency participates in federal and appellate litigation tied to the sector.
The chairman confirmed that the CFTC submitted an amicus brief to the Ninth U.S. Circuit Court of Appeals in support of Crypto.com in its legal fight with the Nevada Gaming Control Board. In a video message posted to X, Selig said the agency was ready to defend its jurisdiction in court and would challenge attempts to undermine its regulatory authority.
