The Commodity Futures Trading Commission’s Division of Enforcement issued an advisory on potential Commodity Exchange Act violations in prediction markets, also known as event contracts, traded on KalshiEX, following the public release of two matters involving misuse of nonpublic information and fraud. It underscored that, even where a designated contract market addresses misconduct through its internal enforcement program, the Commission retains full authority to police illegal trading practices on any DCM. One matter involved a political candidate who traded contracts tied to his own candidacy, contrary to Kalshi rules prohibiting trading in a contract over which a trader has direct or indirect influence; Kalshi imposed USD 2,246.36 in disgorgement and penalties and a five-year suspension, and the fact pattern was framed as potential violations of Section 6(c)(1) and Commission Regulation 180.1. A second matter involved trading in a prediction market related to a YouTube channel by an individual formally affiliated with the contract’s subject and likely in possession of material non-public information; Kalshi imposed USD 20,397.58 in disgorgement and penalties and a two-year suspension, with the conduct characterized as potential misappropriation-based insider trading under the same provisions. The advisory also highlighted other prohibited trading practices the Commission may pursue on DCMs, including wash sales and pre-arranged noncompetitive trading, disruptive trading, and broader fraud and manipulation, and reiterated DCM core principle obligations to maintain audit trails, conduct surveillance, and enforce rules. The Division indicated it will investigate and prosecute violations in appropriate cases and continue coordinating with DCMs on enforcement dockets and referrals.
Commodity Futures Trading Commission 2026-02-25
Commodity Futures Trading Commission issues enforcement advisory on nonpublic information and fraud in Kalshi prediction markets
The Commodity Futures Trading Commission's Division of Enforcement issued an advisory on potential Commodity Exchange Act violations in prediction markets traded on KalshiEX, highlighting misuse of nonpublic information and fraud. The advisory emphasized the Commission's authority to police illegal trading practices on any designated contract market, despite internal enforcement by the market. It outlined prohibited trading practices and reiterated the obligations of designated contract markets to maintain audit trails, conduct surveillance, and enforce rules.