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Amid growing skepticism about the burgeoning prediction markets industry, Kalsi on Thursday announced efforts to expand its oversight and enforcement framework.
The announcement comes days before Super Bowl 60, which Already has generated more than $160 million in prediction market trading volume, Carsi said. This platform and its peers allow users to purchase event contracts for political, pop culture, financial markets, and sports outcomes.
Predictive trading on predetermined outcomes, such as which companies will air Super Bowl ads on Sunday, has raised questions about possible insider trading. New York Attorney General Letitia James issued a warning Monday about what she called “unregulated prediction markets.”
“Being federally regulated means that Kalsi prohibits market manipulation and insider trading, places limits on the types of markets it is listed on, performs know-your-customer (KYC) and anti-money laundering (AML) checks on all users before trading, and publicly reports all transactions to the CFTC on a daily basis,” the company said in a release. “Mr. Carsi also spent years building custom predictive market trade monitoring and enforcement systems similar to those used in the stock market.”
Kalsi announced on Thursday it would take further steps, establishing an independent oversight advisory board to provide analysis to the company’s outside counsel on a quarterly basis and publish statistics on investigations of suspicious activity on the platform. The company also announced a surveillance partnership with Solidus Labs and the director of the Wharton Forensic Analysis Laboratory.
Prediction Markets will now work with the former Under Secretary of the Treasury for Terrorism and Financial Intelligence to advise Kalsi on “market integrity, trade monitoring and financial compliance issues”.
The company announced that Carsi attorney Robert Denor has been appointed executive director and will work with an advisory board to identify insider trading and market manipulation.
Kalsi said they have also launched a hub on their website to provide consumers with resources on responsible trading and market health.
CEO Tarek Mansour said in a post on X that if the company is found to have committed any wrongdoing, it could face fines as well as prosecution with the Commodity Futures Trading Commission, which regulates U.S. event contracts, and the Department of Justice.
“Last year, we conducted more than 200 investigations and suspended related accounts,” Mansour wrote. “Of these, more than a dozen have become active cases and several have been referred to law enforcement.”
Mansour said Kalsi’s market surveillance system is based on systems used by the New York Stock Exchange and Nasdaq, and alerts on suspicious activity by executing trades through pattern recognition models.
“There are bad actors in every industry, and no system is perfect, including Kalsi,” Mansour wrote. “But we’re working to improve every day. There’s a lot of work ahead!”
Disclosure: CNBC and Kalsi have a commercial relationship that includes customer acquisition and minority ownership.
