Kalshi Faces Potential CFTC Charges Over Contract Filings as New York Judge Denies Novig Injunction

Prediction markets sustained dual regulatory setbacks this week. The CFTC warned Kalshi of potential enforcement action over contract notification failures. A New York federal judge rejected Novig's attempt to block state gambling laws, ruling its products amount to sports betting.

CFTC Warns Kalshi on Notification Requirements

The CFTC has privately warned Kalshi that it could face imminent enforcement charges over possible failures to properly notify the agency about new contracts, as reported by Gambling Insider citing Politico and Reuters. A person with direct knowledge told Politico the investigation has been underway for months and concerns whether Kalshi complied with federal product notification requirements for dozens of contracts. No public charges have been announced, but the warning suggests they could be imminent. A settlement is also possible.

Under the CFTC’s self-certification process, regulated exchanges can list new products without prior approval as long as they attest that the contracts comply with applicable laws and regulations. Elisabeth Diana, Kalshi spokesperson, told Politico that the warning concerned “a procedural error involving the submission of a handful of contracts, many of which weren’t live.” She added that the company is “already addressing the issue”.

The potential enforcement action comes at a sensitive time. The CFTC has taken a supportive position and defended its authority over prediction markets against state regulators.

Judge McMahon Rejects Novig Arguments and CFTC Approach

U.S. District Judge Colleen McMahon denied Novig’s request for a preliminary injunction blocking state gambling enforcement. In a November 10 ruling, McMahon concluded that Novig’s sports event contracts are not swaps under the Commodity Exchange Act. She also rejected the company’s argument that federal law preempts New York’s gambling regulations.

McMahon questioned the CFTC’s changing position on sports contracts and its October rules. She criticized the CFTC’s emergency order telling Kalshi to continue operating in New York. McMahon wrote that it “smacks of a collusive effort between a regulator and regulatee to generate a claim for conflict preemption.”

She dismissed Novig’s peer-to-peer distinction. “Novig makes its money, not off the sucker who places a losing bet on a sports event, but by charging two suckers a fee for the privilege of betting against each other on its platform. Again, not a difference that makes a difference,” McMahon wrote. McMahon called Novig’s licensing conflict argument “ridiculous” and concluded, “The Court is not required to disregard common sense – Novig’s sports event contracts are sports betting.”

Rep. Ro Khanna called for Congress to ban sports prediction markets. He described them as “sports betting disguised as financial trading” that “flout state and tribal gambling laws, siphon state tax revenues, fuel addiction, and expose young Americans to public health risks while evading state consumer safeguards.” These moves expose the friction between federal oversight and state authority that prediction platforms must now navigate.