February 4, 2025 3 min read

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CFTC Issues Supplemental No-Action Letter to Kalshi

The Commodity Futures Trading Commission’s staff has issued an additional letter regarding a no-action position on reporting and recordkeeping obligations for Kalshi

Last September, the Court of Appeals for the District of Columbia Circuit applied a temporary freeze order against Kalshi, stopping election betting operations right after a judge sided with the prediction market platform. 

One of the latest developments in the two sides’ long-term legal hurdle consisted of the January 17 hearing at the same court of appeals, where they made oral arguments during an hour-and-a-half meeting. 

Now, the Commodity Futures Trading Commission (CFTC) has decided to grant a no-action position to Kalshi, providing regulatory relief for certain operational requirements related to its platform. 

The no-action position signals that the CFTC will not take any enforcement action against Kalshi regarding compliance with swap data reporting and recordkeeping rules for participants in KalshiEX LLC, a designated contract market, and Kalshi Klear LLC, a derivatives clearing organization.

The Decision Follows Kalshi’s Request

The decision follows a request by KalshiEX and Kalshi Klear LLC seeking adjustments to a CFTC ruling made last year.

The two parties requested that CFTC Letter No. 24-15 be modified to remove the condition banning third-party clearing by participants and prohibiting Kalshi from covering fully collateralized variable payout contracts

According to the new decision, Kalshi can now clear contracts through third-party clearing members, effectively removing the restriction from the prior CFTC notice. 

Additionally, the relief extends to binary options and variable payout contracts that are executed on KalshiEX and cleared through Kalshi Klear. 

In other words, the platform will become more flexible when handling its operations, a crucial step for its ongoing development.

The Classification Issue

Operating as an event contract exchange, Kalshi reunites users who are looking to buy and sell trade contracts based on the potential outcomes of events happening in the real world. 

As opposed to standard sportsbook platforms where bettors have to gamble against the house, Kalshi works as a marketplace where individuals need to take opposing sides on certain events. 

The platform has gained attention for offering contracts tied to political events, sports outcomes, and other real-world scenarios, distinguishing itself from traditional gambling avenues.

Despite being regulated by the CFTC, Kalshi has faced scrutiny from both state and federal regulators

One of the key issues is the availability of sports event trading nationwide despite the fact that some states still prohibit sports gambling

This raises legal concerns about how Kalshi’s operations should be classified. The company argues that its contracts fundamentally differ from traditional betting because users do not bet against Kalshi itself but instead engage in peer-to-peer trading.

Kalshi has also started to make moves to expand its customer base and grow its influence in the financial markets

Recently, the company brought Donald Trump Jr. on board as an adviser, hoping to leverage his Wall Street connections to help grow its platform.

As the regulatory environment for event contract trading remains uncertain, CFTC acting chair Caroline Pham has announced plans to hold roundtables to discuss the future of prediction markets, particularly in political events. 

The roundtable talks will cover market trends as well as the growing regulatory concerns around Kalshi and other similar platforms. Kalshi sees its offerings as part of a new asset class rather than traditional gambling products, positioning itself as a pioneer in the sector.

After finishing her master's in publishing and writing, Melanie began her career as an online editor for a large gaming blog and has now transitioned over towards the iGaming industry. She helps to ensure that our news pieces are written to the highest standard possible under the guidance of senior management.

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