Kalshi, a prediction market, has formally requested approval from the US CFTC. The request is for approval to introduce event-based derivatives tied to major American sports leagues.
The contracts will allow traders to buy and sell positions. These positions will be based on whether a specific team will win a championship in leagues like the NFL, NHL, NBA, and NCAA.
Authorities structure payouts so that holders of a winning position receive $1 per share. Traders will be able to buy shares at prices between $0.01 and $0.99.
Kalshi stated that the market will remain open until an official result is announced. They also have contingencies in place to account for unexpected changes, such as event postponements or cancellations.
Kalshi has submitted certification documents. It also provided an explanation of the structure of the contract. Additionally, Kalshi requested confidential treatment under the FOIA or the Freedom of Information Act for proprietary details.
Authorities will restrict certain individuals from trading these contracts to maintain market integrity.
Authorities will not allow current and former players, coaches, and staff from the listed leagues to participate.
The ban also includes league employees, team owners, paid officials, and the household members and immediate family of restricted individuals.
Authorities will only allow individuals aged 18 and older to trade these contracts. Yet, the legal age for sports betting in most US states is 21. This could become a key issues in regulatory discussions.
Request of Kalshi comes in the middle of increased regulatory scrutiny of sports-based event contracts.
In early January, the CFTC launched a 90-day review of sports contracts from Crypto.com. The CFTC also ordered the platform to suspend trading in the meantime.
A Crypto.com spokesperson criticized the move. They said it is disappointing that the current and imminently departing CFTC leadership took this action. The spokesperson also mentioned that the incoming CFTC leadership should determine how free markets operate under its administration.
