If the activity is prohibited by state law, the CFTC wants to know if it should allow the activity, including on an interstate basis. Federal agencies are able to preempt state restrictions.
The New York-based Kalshi is the first federally regulated financial exchange that allows users to trade directly on the likelihood of a particular event. While it offers products that are financially similar to those that have been offered for years by the Chicago Mercantile Exchange and the Chicago Board of Trade, Kalshi covers whether there will be delays at Chicago’s O’Hare Airport, for example, instead of futures on the price of pork bellies.
It is currently offering contracts on whether powerful hurricanes will hit New York City or Miami this year, if 2022 will be the hottest year on record, and how the U.S. Supreme Court will rule on the affirmative action policy at Harvard University.
The CFTC in 2012 rejected another proposal for political event contracts. It currently allows those offered by the Iowa Electronics Markets, run by the University of Iowa. It recently told another political market, PredictIt, to stop its operations. PredictIt is run by the Victoria University of Wellington, New Zealand, and Aristotle Inc., a U.S. political data firm. The agency determined PredictIt was not in compliance with a staff letter allowing it to operate.
The CFTC is examining whether Kalshi’s contracts could affect the integrity, or perception of integrity, of U.S. elections. It is also considering whether there is a chance that insiders, such as those with internal polling data, could manipulate the contracts.
Read More: CFTC examining whether to allow bets on party control of Congress