Prediction markets are booming, but the CFTC is paying attention. With Crypto.com and Kalshi under review, could stricter oversight be coming for event-based trading?
The Commodity Futures Trading Commission is closely scrutinizing Crypto.com and Kalshi Inc., seeking clarity on how their newly launched Super Bowl event contracts align with U.S. derivatives regulations, according to Bloomberg.
This heightened oversight comes on the heels of a Jan. 27 announcement in which the CFTC’s leadership pledged to monitor emerging issues in the derivatives market, with event-based trading products falling squarely in their sights.
Crypto.com, which operates a U.S.-based derivatives exchange, had notified the CFTC on Dec. 19 of its intent to launch Super Bowl-related contracts by Dec. 23.
However, the short notice left regulators with minimal time to review the products ahead of the Christmas holiday and amid concerns over a possible government shutdown.
Weeks later, the CFTC is now flexing its regulatory authority, requesting additional information from firms that self-certify their financial offerings.
Under existing derivatives laws, firms that self-certify must demonstrate that their products are not easily manipulated and comply with U.S. regulations.
While the CFTC’s review process does not grant it immediate power to halt trading, the agency can later issue bans or take enforcement action if concerns arise.
A CFTC spokesperson confirmed, “We are continuing to review the contracts in accordance with our regulations,” while leaving the door open for potential enforcement or new rulemaking.
Crypto.com remains firm in defending its stance. “We firmly believe in the legality of our event contracts and believe the CFTC is the appropriate regulator to bring federally regulated market integrity, manipulation controls, and product availability in all 50 states,” a company spokesperson told Bloomberg.
Interestingly, Crypto.com had previously withdrawn two sports-related filings that were under regulatory scrutiny, later opting to self-certify a new contract targeting spectator sports and related industries.
Meanwhile, Kalshi Inc. launched its “Kansas City vs. Philadelphia” Super Bowl market on Jan. 24, which has already seen trading volume climb to nearly $2.5 million as of Jan. 4.
Additionally, the company introduced contracts allowing users to wager on brands likely to advertise during the Super Bowl, drawing more than $1.5 million in trading activity.
Amid this, the broader prediction markets industry has seen volatility.
During the 2024 U.S. presidential election cycle, Polymarket—the largest decentralized prediction market—processed more than $2.5 billion in bets, with election-related wagers leading the surge.
However, by January 2025, volumes dropped significantly to around $1.24 billion, reflecting a cooling interest after the election hype subsided.
The CFTC’s ongoing review coincides with Robinhood Markets’ entry into event-based trading. On Feb. 3, Robinhood announced that it would enable its derivatives clients to trade sports event contracts through Kalshi’s exchange.
“With an emerging asset class like event contracts, we recognize an opportunity to better serve our customers as their interests converge across the markets, news, sports, and entertainment,” Robinhood stated.
While the agency can’t immediately halt trading of these contracts due to a mandatory 90-day review process, it retains the power to ban them later. With the Super Bowl set for Feb. 9, any decision will come after the event.
