Kalshi Proposes 5 Percent Quarterly Cap on Affiliate Trading to Address CFTC Conflict Rules

Kalshi has told the Commodity Futures Trading Commission it will accept a cap limiting its subsidiary trading desk to 5 percent of betting volume on the exchange each quarter. The offer serves as an alternative to the agency’s proposed conflict-of-interest rules targeting structures in which an exchange owns a principal trading arm that bets on its own platform. Kalshi agrees the corporate setup creates potential risks that warrant regulatory action, a position it had not previously acknowledged.

The letter forms part of the public comment period on the CFTC proposal. Kalshi recommends that the agency define affiliate relationships according to voting interest and ownership percentage. It further calls for independent financial surveillance of these relationships and strict informational barriers, including separate physical offices for the trading entity and the exchange.

Kalshi’s Limits on Proposed Restrictions

Kalshi opposes certain CFTC measures that would restrict an affiliated trading arm’s profitability, describing them as operationally burdensome and subject to evasion. One such measure would assign affiliated arms last priority at every price level in the order book. The company’s suggested 5 percent cap would apply industry-wide to single-event bets and parlays executed through an RFQ system. Even if confined to maker volume, in September, the 5% figure would have represented about $2.3 billion, per Aldrin Research.

Kalshi spokesperson Elisabeth Diana confirmed that Kalshi Trading has accounted for approximately 1.5 percent of exchange volume this year. Diana stated: “We support affiliated market making only on a narrowly limited basis, under programs that are disclosed to the public and filed with the CFTC.” The letter also urges exchanges to disclose affiliate trading volume for each wager type on a quarterly basis. As reported by Sportico, more than 50 public comments have been filed. CME Group called for an outright ban on principal trading by exchange affiliates. Fanatics wrote that such market activity should not be restrained. Affiliates can supply liquidity when independent market makers do not, though the CFTC proposal targets profit-driven strategies.

Reporting: Sportico

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