CFTC Enforcement Division Releases Advisory on Prediction Markets

The Commodity Futures Trading Commission’s Division of Enforcement has recently released an advisory regarding two enforcement cases involving the misuse of nonpublic information and fraud on prediction markets, specifically on KalshiEX. The cases detailed in the advisory shed light on problematic practices within trading on this designated contract market.

The first case highlighted in the advisory occurred in May 2025, where videos circulating on social media suggested a political candidate was trading on their own candidacy on KalshiEX. Upon investigation, it was revealed that the candidate acknowledged the improper trades, which violated Kalshi’s rules prohibiting trading with any influence over the outcome. As a result, the trader faced a financial penalty of $2,246.36 and a 5-year suspension from the exchange.

The second case took place in August and September 2025 and involved an individual who traded a prediction market related to a YouTube channel they were affiliated with. This trader had access to material non-public information due to their employment relationship with the channel, leading to profitable but illicit trades. KalshiEX imposed a financial penalty of $20,397.58 and a 2-year suspension on this trader for their actions.

These cases highlight the importance of complying with exchange rules and regulations to maintain the integrity of prediction markets. The enforcement actions taken by KalshiEX serve as a deterrent against future misconduct and aim to uphold fair and transparent trading practices on the platform.

The advisory also stressed the authority of the Commission to address illegal trading practices on designated contract markets like KalshiEX. Prohibited activities such as insider trading, pre-arranged noncompetitive trading, wash sales, disruptive trading, fraud, and manipulation are closely monitored, and violators are subject to investigation and prosecution.

It is essential for designated contract markets to maintain audit trails, conduct surveillance, and enforce rules against prohibited practices to ensure a fair and orderly trading environment. The Division of Enforcement will continue to collaborate with DCMs to investigate potential violations and uphold the core principles for contract markets outlined in the Act.

In conclusion, the enforcement advisory issued by the CFTC serves as a reminder of the importance of ethical trading practices and adherence to regulations to prevent fraudulent activities in prediction markets. By holding traders accountable for misconduct, regulatory bodies like the CFTC aim to protect the integrity of the market and promote transparency within the trading community.