Kalshi Forwarded to State Authorities by BBB Following Advertising Probe Refusal
The Better Business Bureau's advertising division has escalated matters involving Kalshi to state regulators after the prediction market company refused to cooperate with an investigation into how influencers disclose paid partnerships.
The National Advertising Division (NAD), an advertising watchdog operated by the Better Business Bureau (BBB), has decided to forward Kalshi's case to state regulatory bodies following the prediction market company's refusal to take part in a review of its social media marketing tactics, introducing additional regulatory pressure on the rapidly expanding event trading service.
NAD announced in a Monday statement that the case will be forwarded to appropriate state regulatory agencies, including state Attorneys General where applicable, to potentially pursue enforcement measures.
The investigation focused on determining whether influencers and affiliate partners working with Kalshi properly disclosed their financial arrangements in social media content and whether the platform implemented sufficient measures to adhere to Federal Trade Commission guidelines governing endorsements.
The BBB reported that Kalshi chose not to engage with NAD's voluntary self-regulation process regarding its promotional activities. Consequently, the watchdog organization plans to alert the social media companies on whose platforms the advertisements were published.
At issue for NAD was whether material connections between Kalshi and influencers or affiliates were clearly and conspicuously disclosed in social media advertising.
BBB
Prediction markets continue rapid growth despite regulatory scrutiny
Kalshi's remarkable expansion has been driven significantly by social media promotional campaigns, which have been instrumental in bringing new participants to the platform and increasing transaction volumes related to real-world event predictions.
According to statements made by a Kalshi spokesperson to Bloomberg, the platform is projected to reach an annualized revenue run rate of $1.5 billion, with this strong performance contributing to the successful completion of a $1 billion financing round that established the company's valuation at $22 billion.
Even as regulatory battles persist between state authorities and the Commodity Futures Trading Commission (CFTC) regarding jurisdiction over event-based contracts, and amid claims of insider trading violations, prediction market platforms are experiencing sustained growth in adoption from both retail traders and institutional market participants.
According to a research analysis published by Bernstein in May, the prediction market industry is transitioning into an "institutional" phase, with the firm's analysts pointing to a block trade transaction completed on Kalshi as proof of enhanced market liquidity and superior price discovery mechanisms.
We believe the introduction of block trading and bespoke contracts could expand participation from institutional investors seeking targeted exposure to event risks.
Bernstein analysts