Events Subject to Additional CFTC Review
Under 17 CFR 40.11, some types of events listed by designated contract markets like Kalshi are subject to additional review by the CFTC. These events may involve topics like war, assassinations, and terrorism. Generally, the CFTC has the right to review and prohibit any contract that it determines may fall within these categories or otherwise violate the public interest as part of its "public interest review" power.
In addition, Kalshi reviews contract proposals on a case-by-case basis and makes a number of determinations not to review contracts that might be in poor taste, easily subject to manipulation, or do not have any extrinsic economic value.
What does the law say about CFTC Review?
The CFTC has the right to initiate a public interest review for any listed contract and, if it determines that it is not in the public interest, demand a registered entity suspend listing or trading on that contract immediately.
How do some prediction markets list contracts related to these topics?
This regulation applies to all U.S.-registered and regulated prediction markets. However, unregulated offshore prediction markets are not subject to these restrictions and have historically listed contracts that cover topics listed in 17 CFR 40.11. Some competitors of Kalshi have listed contracts that, if listed on a U.S. exchange, the CFTC may have subjected to review and disapproval. Kalshi views many of these contracts as providing bad incentives to traders and the general public, and does not list these kinds of contracts on its exchange.