The disagreement between the traditional futures exchange and the emerging platform was brought directly to the fore at a market round table in Washington, D.C., organized by the United States Commodity Futures Trading Commission (CFTC). The CME Chairman, Terry Duffy, and the co-founder of the forecast market platform Kalshi, Luna López Lara, met on the spot, focusing on market manipulation risks, contract design and consistency of regulatory standards.
CME Challenge Review Criteria
At the meeting, Duffy stated that he was “very worried” about predicting markets and that some of the incident contracts were more vulnerable to manipulation. He cited some of the contracts provided by Kalshi and questioned whether such products were subject to the same level of scrutiny as mature exchanges.
He also mentioned that Kalshi could go online with a power-related predictive contract, but that similar contracts proposed by CME itself were still under review, suggesting that regulatory measures were inconsistent. Duffy then gave the ironic example of saying that certain contracts were not commensurate with the positioning of serious financial markets.
Kalshi was on the scene.
After being named, Lara responded on the spot and asked if CME had never experienced market manipulation in its history. She stated that risk was not unique to the forecast market, that similar problems had arisen in traditional markets and in internal and external exchanges, and that the role of regulation should be to identify problems and address them, rather than to deny the whole market type on that basis.
The parties subsequently escalated further. According to Duffy, CME has more regulators than Kalshi as a whole; Lara responded by saying that perhaps this is an indication of the efficiency of the other party ' s studies. Duffy then re-emphasized that the market had to be credible before the moderator had to interrupt the debate.
In a later statement, the CEO of Draft Kings, Jason Robbins, called on participants to stop attacking each other ' s business model, saying that it would not help to move the discussion forward.
The federal and state governments.
Behind this dispute is the greater disagreement of the United States over predicting the attribution of market regulation. Kalshi, Polymarket and others allow users to contract events around sports, elections and other practical events, whether these products are derivatives of federal control or are recognized as lottery products under state law and are at the heart of regulatory and judicial disputes.
The Chairman of the CTC, Brian Quintenz Selig, had previously publicly defended the regulatory authority at the federal level and warned the state governments that had challenged it to “see the courts”. Since then, the CFTC has taken legal action against states that have attempted to restrict their contracts under the Lottery Act.
In June of this year, the CTC proposed to limit part of the contracts related to war, assassinations and the subdivision of certain sports, on the grounds that these products are more vulnerable to manipulation. Earlier this month, nine Democratic Senators demanded that CFTC ban wildfire contracts, claiming that such products could induce arson, insider trading and disaster for profit.
Kalshi's recently under pressure.
Kalshi recently faced legal pressure in several states. Last week, a Washington State judge ordered the company to stop providing local contracts for sports, elections, political and other events, arguing that its practices were likely to violate state lottery and consumer protection laws.
Two days earlier, however, CFTC had asked Kalshi to continue to maintain the deal in response to another New York State dispute about its contract. It also shows that the attitude of federal agencies and state governments towards the same type of product continues to clash.
As market transactions are projected to expand and cover more topics, such platforms will face more intensive regulatory scrutiny. For traditional exchanges, the dispute is not only a competition issue, but also a question of whether the event contract will be integrated into a unified derivative regulatory system.