The CFTC is reviewing "mention markets" on prediction platforms, Kalshi has pulled its sports-related versions, and a Washington state judge has blocked several Kalshi markets. Baltimore has now sued both Kalshi and Polymarket over sports betting, while a JPMorgan relationship dispute adds pressure from the banking side.
CFTC reviews mention markets
The Commodity Futures Trading Commission is conducting an internal review into "mention markets" on prediction platforms, according to people familiar with the matter. Mention markets let traders speculate on whether specific words will appear in a speech, an earnings call, or a broadcast. Kalshi removed its sports-related mention markets around the same time the CFTC alerted the company to the review, several weeks ago.
Polymarket does not offer mention markets on its CFTC-regulated U.S. exchange, though it offers them overseas. Critics see the contracts as easy to manipulate by one individual; Kalshi's mention markets drew about $3.3 million in trading volume last month, far behind larger crypto-focused markets. The CFTC is separately investigating a former Trump teleprompter operator who allegedly made $90,000 betting on the content of the president's speeches.
States and cities push back
A Washington state judge on Thursday issued an order blocking several of Kalshi's markets from operating there, including mention markets, sports, elections and other high-volume categories, ruling Kalshi is likely violating state law as an illegal gambling operation. Washington becomes the fourth state to block Kalshi, joining Michigan, Nevada and Massachusetts.
Baltimore has taken the fight to the city level. Mayor Brandon M. Scott and the Baltimore City Council filed separate lawsuits on August 13 against Kalshi and Polymarket, alleging violations of the city's Consumer Protection Ordinance. The complaints claim the companies let residents bet on game winners, spreads, totals and player stats without the licenses Maryland requires for sports betting, and that they market the products in ways that can mislead consumers about their legal status.
Banks pull back
The scrutiny extends to the banking sector. The Financial Times reported that JPMorgan cut off Polymarket from financial services last October over concerns about government regulation. A Polymarket spokesperson disputed the characterization, telling CNBC the company still maintains ties with the bank. According to a Polymarket spokesperson: "Any suggestion otherwise fundamentally mischaracterizes our relationship."
Kalshi is also facing a lawsuit from New York Attorney General Letitia James seeking to shut down its operations in the state, though the CFTC used its emergency authority to let Kalshi keep operating there after the company sought federal help. A federal judge in Minnesota last month overturned a potential statewide ban on prediction market platforms.
Sources: CNBC, CryptoPotato
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