Kalshi could face enforcement charges from the U.S. Commodity Futures Trading Commission (CFTC) over alleged failures to notify the agency about dozens of proposed contracts under development, according to a report by POLITICO.

The months-long investigation centers on the prediction market platform's self-certification process and comes as Democrats prepare stronger oversight of prediction markets following their gains in the November midterm elections.

CFTC Investigation Focuses on Kalshi Contract Filings

The CFTC is examining whether Kalshi properly notified the agency about dozens of contracts in development. A person familiar with the investigation told POLITICO that enforcement charges could arrive soon, though the matter could also conclude in a settlement.

Kalshi has characterized the episode as a procedural filing error. Spokesperson Elisabeth Diana said it involved a handful of contracts, many of which never went live, and confirmed the company was addressing the matter.

At the heart of the probe is self-certification, a process that allows regulated exchanges to introduce contracts without explicit CFTC approval. Under this framework, exchanges can launch products as soon as the following day, provided operators certify compliance with agency requirements, including protections against market manipulation. Because certification filings are the advance notice the agency receives before a product can go live, the probe turns on how much pre-launch information regulators get under that fast-moving system.

Democrats Prepare Greater Oversight of Prediction Markets

The investigation lands as Democrats prepare to step up scrutiny of prediction markets in the next Congress, following their gains in the November midterm elections.

Meanwhile, the Michael Selig-led CFTC is also investigating Polymarket. The agency is examining whether the platform violated its 2022 settlement agreement restricting access by U.S. users.

Both Kalshi and Polymarket have expanded their operations under a more accommodating regulatory approach. POLITICO reported their respective valuations at $40 billion and $21 billion. That growth has taken place within the same self-certification framework the CFTC is now reviewing.

Self-Certification Process Draws Industry Attention

The CFTC's review also touches on broader questions surrounding self-certification, which allows exchanges to introduce products without waiting for explicit regulatory approval.

CME Group CEO Terry Duffy has previously criticized prediction market contracts over manipulation risks, arguing that certain wagers should not have received approval for trading.

In July, the CFTC warned prediction market operators against using overly broad language when certifying new products. The agency's latest scrutiny now spans both Kalshi's contract submissions and Polymarket's compliance with its settlement. Misgivings about how self-certified prediction contracts reach the market have thus come from both an established derivatives exchange chief and the regulator itself.