The Commodity Futures Trading Commission’s Division of Enforcement published an advisory after two publicly released matters involving prediction markets (event contracts) traded on KalshiEX, a Designated Contract Market. The advisory highlights that trading based on material nonpublic information or other fraudulent or manipulative schemes can violate the Commodity Exchange Act and Commission Regulation 180.1, and underscores that the Commission has full authority to police illegal trading practices on any designated contract market even where an exchange has already taken internal disciplinary action. In one matter, a political candidate appeared to trade contracts tied to his own candidacy, which Kalshi rules prohibit where the trader has direct or indirect influence over the outcome. Kalshi imposed USD 2,246.36 in financial penalties (including USD 246.36 disgorgement) and a five-year suspension, and the fact pattern was described as potentially implicating Commodity Exchange Act Section 6(c)(1) and Regulation 180.1(a)(1) and (3). In another, a trader affiliated with a YouTube channel traded a market tied to that channel while likely having advance, nonpublic knowledge of video contents, leading Kalshi to impose USD 20,397.58 in financial penalties (including USD 5,397.58 disgorgement) and a two-year suspension, with the conduct framed as potential misappropriation of confidential information in breach of a duty of trust and confidence under Section 6(c)(1) and Regulation 180.1(a)(1) and (3). The advisory also flags other prohibited practices the Commission can pursue on designated contract markets, including pre-arranged, noncompetitive trading and wash sales, disruptive trading, and broader fraud and manipulation. It reiterates that designated contract markets have independent duties to maintain audit trails, conduct surveillance, and enforce rules against prohibited practices. The Division indicated it will investigate and prosecute violations in appropriate cases and continue coordinating with designated contract markets on enforcement dockets and referrals.
Commodity Futures Trading Commission 2026-02-25
Commodity Futures Trading Commission issues enforcement advisory on misuse of nonpublic information and fraud in Kalshi prediction markets
The Commodity Futures Trading Commission’s Division of Enforcement issued an advisory after two KalshiEX prediction market cases, emphasizing that trading on material nonpublic information or engaging in fraud violates the Commodity Exchange Act and Regulation 180.1. The advisory underscores the Commission's authority to address illegal trading on designated contract markets, regardless of internal disciplinary actions, and highlights these markets' responsibilities to maintain audit trails, conduct surveillance, and enforce rules against prohibited practices.