Regulatory scrutiny is intensifying for Kalshi, facing challenges from both local governments and federal authorities in the United States this week. The heightened oversight coincides with Baltimore and New York City taking significant steps against the leading prediction markets operator. Compounding these issues, the Commodity Futures Trading Commission (CFTC) has initiated an investigation into so-called "mention markets," which is linked to a recent controversy involving President Donald Trump’s teleprompter operator.
On Tuesday, the CFTC, led by Chairman Michael Selig, exercised its infrequently invoked emergency powers to allow Kalshi to continue its operations in New York despite state directives that would have halted its activities. This unusual intervention, however, does not absolve Kalshi from the troubles it has caused President Trump, who appointed Selig, following revelations that Trump’s teleprompter operator, Gabriel Perez, earned over $100,000 on mention markets predicting the phrases Trump would use in his speeches.
“The President finds it deeply unfortunate and, frankly, a disgrace,” remarked White House press secretary Karoline Leavitt, emphasizing that Perez is currently complying with the investigation while on paid administrative leave. In a move likely provoked by the federal inquiry, Kalshi has decided to eliminate mention markets from its offerings. The company has not provided any comments, leaving it unclear if these markets will make a return in the future.
In a significant legal action, Baltimore's Mayor Brandon Scott and the City Council have filed a lawsuit against Kalshi and Polymarket for "operating illegal, unlicensed sports-betting platforms and misleading consumers about the legality and regulatory status of their products.” This lawsuit marks Baltimore as the first major U.S. city to confront prediction market operators without direction from state governments.
“These companies are running sportsbooks without licenses and betting that a new label will put them above the law," Scott stated in a press release. He added, “Baltimore will not let multibillion-dollar companies put profits over people and harm our communities through illegal gambling.” The lawsuits aim to prevent both Kalshi and Polymarket from conducting operations within the city, proposing maximum fines, restitution for Baltimore residents, and the return of unjust profits. The financial penalties sought echo those of New York Attorney General Letitia James, whose lawsuit against Kalshi could reach as high as $36 billion if fully awarded.
Baltimore contends that these operators "market their platforms in ways that create a false or misleading impression" regarding the legality and regulation of their offerings, making gambling easily accessible to consumers.
Meanwhile, New York City Council Speaker Julie Menin announced a probe into four prediction markets operators for potentially employing false and deceptive marketing tactics, particularly aimed at young people. "As a mother of four, I understand the concerns of raising children in a world where predatory industries continually devise new methods to target them,” Menin expressed. “Prediction markets aggressively entice consumers to bet on sports, politics, culture, weather, and virtually anything.”
Menin is committed to using the Council’s full power to safeguard New Yorkers from dishonest marketing practices that threaten consumers, especially the youth.
The NYC investigation includes correspondence to major firms such as Coinbase, Gemini, Kalshi, and Polymarket. Notably, a report from the Wall Street Journal indicating that Polymarket has engaged influencers to promote fake trades will also influence the ongoing investigation.
