How Kalshi creates a safe environment for traders

Kalshi is strictly regulated by the CFTC, which has safely overseen trillions of dollars in commodities markets since its inception. In addition to CFTC regulations, Kalshi goes further and imposes additional scrutiny on our markets to catch insider trading. Our extensive in-house surveillance monitors for suspicious activity, and our teams implement a strict disciplinary process in accordance with our regulator’s requirements and expectations to address trading integrity issues. Below is an overview of how Kalshi protects consumers on its platform.

Kalshi is a Designated Contract Market (DCM), a federally regulated financial exchange that falls under the jurisdiction of the Commodities and Futures Trading Commission (CFTC). As a registered DCM, Kalshi is subject to strict regulations designed to protect market integrity. Many of these are similar to those that protect other American financial exchanges, like the stock market.

These regulations include:

Kalshi’s status as a registered DCM not only requires that we follow these regulations, but also demands that Kalshi build and maintain exchange programs to ensure ongoing regulatory compliance and fair, safe markets for users. 

Despite being founded in 2018, Kalshi did not offer a single live contract until 2021. This is because the company spent the first three and a half years of its existence working with regulators and policymakers to obtain a DCM license and developing a framework to offer event contracts in a safe, trusted, and well-regulated way. 

While Kalshi’s competitors cut corners or went offshore, we sacrificed first-mover advantage to ensure that Kalshi operated under a robust regulatory framework that would create a secure, well-managed, and sophisticated derivatives exchange. Our philosophy is simple: if the markets are not safe, no one will trade on them. It is a business imperative, and core to the identity of Kalshi, for all of our markets to operate with maximum trust, safety, and oversight. 

To this end, Kalshi’s integrity and surveillance monitoring not only meet, but also go beyond what is strictly required by the CFTC, and even beyond what is federally prohibited for securities trading. Under Rules 5.17(y) and (z) of the Kalshi Rulebook, there is an extensive list of people who are prohibited from trading our markets, which includes:

These prohibitions are found on the page of every market under “Trading Prohibitions.” Any trader that violates these rules faces potential investigation, suspension, and discipline by the exchange, as well as referral to law enforcement in appropriate cases.

Our strict government and self-imposed regulations are boosted by our industry-leading surveillance and monitoring programs. Kalshi’s in-house surveillance and compliance team monitors markets for suspicious activity at all times. Kalshi also partners with third-party vendors like IC360, which works with every major sports league, NCAA conference, and sportsbook, to scan for additional potential trading integrity issues.

When we do flag activity that raises concerns, our Compliance Department opens an investigation. While investigations proceed, accounts remain frozen. We review evidence from a variety of sources, including open source evidence, evidence obtained from our monitoring software, and from traders themselves. Traders must comply with investigations or risk suspension from Kalshi. We combine this evidence with information from our strict identity verification and KYC (Know-Your-Customer) database to identify potential violations and, where appropriate, bring disciplinary actions against traders who violate the rules. 

Kalshi’s identity is tightly intertwined with its embrace of regulation and oversight. We consider it a critical mission of the company to operate our markets with the maximum possible amount of safety and trust, and will continue developing and enhancing our trading integrity and enforcement systems as our exchange continues to grow.

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