Federal regulators have launched an investigation into prediction markets, and Kalshi removed all its sports-related offerings in the course of the probe, NPR reports, citing two informed sources who spoke anonymously as they were not authorized to speak publicly. Kalshi and the CFTC declined to comment, and the commission has not published any materials describing the review. Sports bets account for the lion's share of the billions that flow through the Kalshi platform weekly.
Under the Commodity Exchange Act, only contracts that are not susceptible to manipulation can be listed on designated contract markets, and one of NPR's sources said that prediction markets are "potentially very susceptible to manipulation, so the CFTC is carefully studying whether some of them make sense." A second source, a former Kalshi employee, told the outlet that the exchange's own lawyers share this concern, as the nature of some markets attracts people capable of influencing the outcome. According to the former employee, inside Kalshi, employees discussed the usefulness of this category, with co-founder Luana Lopes Lara defending it.
As of Friday, our analysis shows that the "Predictions" section of Kalshi lacks a sports filter altogether: the only subcategories are earnings reports, politicians, Trump, and a section dedicated to public companies. At least 216 individual contracts remain across 12 market groups: prediction markets on earnings reports for Klarna, Walmart, Target, Home Depot, John Deere, Toll Brothers, Futu, and Amer Sports are scheduled to open next week, along with a NASA press conference and a Massachusetts state Senate debate. Polymarket also offers prediction markets, but only on its overseas platform, which is not regulated by the CFTC. They are not currently available on its smaller US-based exchange.
In a Washington state court, King County Superior Court Judge John McHale in his revised injunction orders Kalshi to cease marketing, offering, or accepting contracts related to sports, elections, politics, entertainment, culture, technology and science, as well as predictions. Commodity, climate, economy, and financial markets may continue operating. The state Attorney General's office announced this ruling on Thursday, simultaneously imposing a series of restrictions based on a geographical limitation. Besides violating gambling laws, the Attorney General stated that "this type of betting carries a high risk of fraud by persons close to the source of information. Such bets are particularly unfair to consumers."
The ruling also prohibits Kalshi from advertising the specified bets to consumers in Washington state, as it was found that "Kalshi's provision, promotion, and advertising of illegal gambling activity constitutes unfair and/or deceptive acts or practices." The Attorney General's office cited a Kalshi advertisement in which one person writes to another that they "found a way to bet on the NFL, even though we live in Washington state." Furthermore, the ruling notes that Kalshi had previously positioned itself as a service allowing consumers to "bet on anything," calling its activities a "prediction market," not gambling.
This decision is based on a preliminary injunction issued by McHale in July, which found that Washington state would likely be able to prove its case, and that without intervention, "significant harm to Washington state consumers" was likely. Kalshi appealed to the Court of Appeals to stay this injunction, but the court denied the request.
A recent high-profile scandal involving prediction markets reached the White House. Gabriel Perez, a teleprompter operator for Trump, allegedly used advance access to prepared speeches to trade on prediction markets. Kalshi froze approximately $90,000 of his profits and passed information about these trades to the Commodity Futures Trading Commission (CFTC) after its oversight team identified them. NPR reported that traders who view prediction markets as a full-time job set up television antennas to gain fractions of a second when watching live broadcasts, and that Trump's rambling speech style causes sharp price swings as traders try to guess which topic he will turn to next.
Events in the legal arena are developing rapidly. The CFTC is attempting to defend Kalshi based on an emergency ruling in New York, and a judge in Connecticut ruled that its sports contracts were never swaps—just a few of many recent examples of diverging actions by different states.
