Kalshi adds software partner as it looks to boost prediction market surveillance

Prediction market Kalshi has partnered with compliance software provider StarCompliance to launch a monitoring platform designed to help financial companies oversee employee activity on prediction markets, as the sector faces increased scrutiny over insider trading and the use of non-public information.

According to Wednesday's announcement, the system is intended to flag employee activity based on transaction volume, trading patterns, market categories and work-hour activity, while giving firms a centralized way to manage investigations and audit records tied to prediction market exposure across onchain and offchain environments.

The launch comes days after a federal judge set a December trial date for US Army Master Sgt. Gannon Ken Van Dyke, who prosecutors allege used non-public information about a military operation targeting Venezuelan President Nicolás Maduro to earn more than $400,000 on prediction market platform Polymarket. Van Dyke has pleaded not guilty to the charges.

StarCompliance said the product is designed to address potential risks around material non-public information, as employees at financial firms may be able to use sensitive business or market information to trade event contracts.

The new monitoring capability extends StarCompliance's existing employee compliance platform, which already tracks traditional securities and digital asset activity, to include prediction market trading through Kalshi.

Related: Coinbase eyes World Cup boost as prediction markets surge: Bernstein

Prediction markets face growing regulatory and lawmaker scrutiny

The launch comes as prediction markets face increasing scrutiny in the United States, where at least 11 states have taken legal or regulatory action against platforms such as Kalshi and Polymarket.

At the center of the dispute is whether event contracts should be regulated under state gambling laws or as federally regulated derivatives overseen by the Commodity Futures Trading Commission (CFTC).

The conflict has produced a patchwork of lawsuits, cease-and-desist orders and proposed legislation. Nevada became the first state to temporarily block Kalshi's operations earlier this year, while Arizona accused the company of operating an illegal gambling business by offering event contracts to state residents.

Prediction market operators and the CFTC have pushed back. At the end of May, Kalshi sued Minnesota after the state enacted what CFTC Chair Michael Selig described as the country's first outright ban on prediction markets. Around the same time, the CFTC joined Kalshi in a separate legal challenge against Rhode Island officials over the regulation of event contracts.

Last week, the CFTC sued New Mexico officials after the state accused Kalshi of offering unlicensed sports betting. The case marked the eighth state targeted by the agency as it seeks to block state-level restrictions on prediction market platforms.

Last month, Representative James Comer asked CEOs of Kalshi and rival Polymarket for information on their responses to insider trading after “suspiciously timed trades” related to US military actions against Iran.

Source: Representative James Comer

Prediction market jurisdiction fight could reach Supreme Court

Speaking on a panel at Bitso's Stablecoin Conference in Mexico City on June 16, industry advocacy group Digital Chamber's CEO Cody Carbone said the dispute between federal regulators and state authorities will likely play out over the next few years. He said:

It's going to be a very heated battle that the courts are going to have to weigh in on.

The advocacy executive said the Trump administration has broadly backed Selig's efforts to position the CFTC as the primary regulator of prediction markets, though he expects ongoing disputes with state gambling regulators to eventually reach the US Supreme Court.

He added that US lawmakers are also debating what types of event contracts should be permitted, including markets tied to politics and war, while insider trading concerns are likely to remain a focus of future legislation and regulatory oversight.

Magazine: The end of anon? AI could unmask crypto’s hidden identities