Kalshi, a U.S.-based prediction market platform regulated by the Commodity Futures Trading Commission (CFTC), has expanded its event contracts to all 50 states, including regions where traditional sports betting remains illegal. This expansion has ignited discussions about the classification and regulation of such markets.

Kalshi operates as a designated contract market, allowing users to trade on the outcomes of various future events by purchasing yes-or-no contracts. These contracts are priced based on the market's estimated probability of an event occurring. The platform covers a wide range of topics, including economic indicators, weather patterns, and political outcomes.

Tarek Mansour, CEO of Kalshi, emphasizes that the platform's event contracts should not be classified as gambling. He highlights that Kalshi does not profit from users' losses, distinguishing it from traditional sportsbooks. Mansour argues that the platform facilitates a marketplace where users trade against each other, rather than betting against the house.

The CFTC has announced a public roundtable to assess the future of prediction markets, including sports-related event contracts. This roundtable aims to develop a comprehensive administrative record with input from various stakeholders to inform the Commission's regulatory approach. Acting Chairman Caroline D. Pham has criticized previous anti-innovation policies and advocates for a forward-looking approach to regulation.

In October 2024, a federal appeals court allowed Kalshi to offer election betting, denying the CFTC's request to halt a ruling that permitted legal political gambling in the United States. The court determined that the CFTC failed to demonstrate how such contracts would harm election integrity.

Kalshi's expansion and the upcoming CFTC roundtable have drawn attention from both regulators and competitors. Blockchain-based platforms like Polymarket, which operates on Ethereum, are also navigating regulatory challenges. In 2022, Polymarket was fined $1.4 million for offering unregistered swaps.

The expansion of prediction markets like Kalshi raises questions about the societal impact of such platforms. Proponents argue that they provide valuable data for forecasting and allow individuals to hedge against various outcomes. Critics, however, express concerns about potential market manipulation and the commodification of significant societal events, such as elections.

Kalshi's nationwide expansion and the ensuing regulatory discussions underscore the complex interplay between innovation in financial markets and the need for appropriate oversight. As the CFTC prepares for its roundtable, the outcomes could significantly influence the future of prediction markets in the United States.