What Is Kalshi?

Kalshi is a U.S.-based prediction market exchange regulated by the Commodity Futures Trading Commission (CFTC) as a Designated Contract Market (DCM). Founded in 2018 by Tarek Mansour and Luana Lopes Lara (both ex-Citadel), Kalshi became the first fully regulated prediction market in the United States and has become central to the national debate over event contract regulation.

What changed as of October 2026

• Appeals courts sided with states on sports contracts. On August 28, 2026 the U.S. Court of Appeals for the Ninth Circuit (KalshiEX, LLC v. Assad, No. 25-7516) held that Kalshi's sports event contracts are likely not "swaps" under the Commodity Exchange Act, so the Act likely does not preempt Nevada's gaming laws as applied to them; it affirmed the dissolution of Kalshi's preliminary injunction. On September 25, 2026 a Sixth Circuit panel reached the same conclusion in Kalshi's Ohio and Tennessee cases, which CoinDesk reported makes U.S. Supreme Court review more likely.
• Arizona's criminal case was halted. On April 10, 2026, at the CFTC's request, the U.S. District Court for the District of Arizona issued a temporary restraining order barring Arizona from pursuing criminal charges against CFTC-regulated designated contract markets. CBS Sports reported on October 15, 2026 that a federal judge has since permanently blocked the prosecution, with appeals not yet exhausted.
• The CFTC moved to write its position into rules. On October 9, 2026 the CFTC proposed expressly defining event contracts (sports, political, cultural and weather contracts included) as swaps, and issued an interim final rule excluding casino-style gambling products, such as sportsbook wagers and casino games, from the swap definition.
• Kalshi is now the larger venue in sports. Pew Research Center's analysis of data from The Block shows sports trading in June and July 2026 topped $58 billion on Kalshi versus nearly $22 billion on Polymarket; combined monthly volume on the two platforms reached $53 billion in July 2026.

How Kalshi Works

Kalshi operates as a traditional exchange with a central limit order book:

• Users are fully KYC-verified (identity, address, SSN)
• Funds are held in segregated customer accounts (regulated protection)
• Contracts are traded on an order book — buyers and sellers are matched directly
• Resolution is handled by Kalshi's centralized Markets Team using pre-specified data sources
• Settlement takes hours to a day; funds can be withdrawn to bank accounts

Contract Types

Kalshi offers event contracts across multiple categories:

• Economics: Federal Reserve rate decisions, inflation readings, jobs reports, GDP data
• Politics: Election outcomes, legislation, policy decisions, government appointments
• Sports: Game outcomes, season results (source of current regulatory controversy)
• Climate & weather: Temperature records, hurricane landfall, weather events
• Culture: Award show winners, product launches, box office milestones
• Finance: Stock index levels, crypto prices, IPOs

Key Milestones

The Arizona Criminal Charges

In March 2026, Arizona's Attorney General filed a 20-count criminal complaint against Kalshi in Maricopa County, alleging:

• Operating a gambling business in Arizona without a state gaming license
• Taking illegal bets on elections (Arizona law prohibits election wagering)

Status as of October 2026: the prosecution is blocked. A temporary restraining order granted on April 10, 2026 at the CFTC's request barred Arizona from continuing criminal proceedings against CFTC-regulated exchanges, and CBS Sports reports that a federal judge has since blocked the charges permanently, with appeals still open.

This represents the first-ever criminal charges against a CFTC-regulated prediction market and escalates the tension between federal regulation (CFTC says event contracts are legal derivatives) and state gambling laws (Arizona says they're illegal bets).

By October 2026 more than a dozen states had taken legal or regulatory action against prediction market platforms (CBS Sports tracks them state by state), but Arizona is the first to pursue criminal rather than civil enforcement.

Kalshi's defense: CFTC regulation preempts state gambling laws — event contracts are federally regulated derivatives, not gambling products. The outcome of this case could define the regulatory landscape for the entire prediction market industry. For sports contracts, two federal appeals courts (the Ninth Circuit on August 28, 2026 and the Sixth Circuit on September 25, 2026) have so far rejected that preemption argument.

Why Kalshi Matters for iGaming

The Regulatory Precedent

Kalshi's legal battles are establishing the framework that will govern prediction markets for years:

• If federal preemption holds, CFTC-regulated prediction markets can operate nationally with a single license — a massive advantage over state-by-state sports betting licensing
• If states can prosecute prediction markets as gambling, operators will need both CFTC registration and state gaming licenses — creating a dual-regulatory landscape

Institutional Credibility

Kalshi has invested heavily in institutional relationships:

• The Fed study validating prediction market forecasting used Kalshi data specifically
• Kalshi supported legislation to ban government officials from prediction markets (demonstrating industry self-regulation)
• Full KYC and segregated accounts meet financial regulatory standards that sports betting platforms often don't

B2B Implications

For iGaming operators evaluating prediction market entry:

1. Kalshi's DCM registration is the gold standard but extremely expensive and complex to obtain. Most operators will enter through API partnerships rather than seeking their own DCM designation.

2. The Arizona case is a signal. If you're building prediction market products, prepare for a regulatory environment where both CFTC and state regulators assert jurisdiction. Dual compliance is the safest path.

3. Kalshi's centralized resolution model aligns better with traditional gaming regulation than Polymarket's decentralized oracle approach. Regulators want auditable, accountable resolution processes.

4. Market design matters legally. Kalshi's sports contracts triggered the Arizona charges partly because they look identical to sports bets. How you design and market prediction contracts affects your regulatory risk profile.

Kalshi vs. Polymarket

In March 2026 Kalshi traded less volume than Polymarket; by mid-2026, driven by sports, it traded more (Pew Research Center). Its regulatory standing is the stronger of the two in the U.S., though the 2026 appellate rulings show that a CFTC designation does not by itself settle whether a state can treat a sports contract as a bet.

Sources

• U.S. Court of Appeals for the Ninth Circuit — KalshiEX, LLC v. Assad, No. 25-7516, opinion filed August 28, 2026
• CFTC — Temporary Restraining Order Blocks Arizona Criminal Enforcement Proceedings on Prediction Markets (April 10, 2026)
• CFTC — Notice of Proposed Rulemaking on including event contracts in the definition of swap (October 9, 2026)
• Pew Research Center — Prediction markets' trading volume doubled between May and July, largely driven by sports (September 23, 2026)
• CoinDesk — Another appeals court rules against Kalshi (September 25, 2026)
• CBS Sports — Status of Kalshi and Polymarket in all 50 states (October 15, 2026)
• Kalshi Help Center — How is Kalshi regulated?

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Last verified: October 16, 2026.