Kalshi asks SEC to delay Cboe binary options contracts amid jurisdiction dispute

Kalshi has asked the US Securities and Exchange Commission to delay approval of new binary options contracts from Cboe Global Markets, according to a report by Valor. The prediction-market platform made the request in a letter sent this month, signed by its compliance director, Sudhir Jain. The report says the move intensifies tension between event-betting platforms and traditional exchanges.

The Cboe contracts would be tied to specific metrics in corporate earnings reports, a segment in which Kalshi already offers event contracts. In the letter, Kalshi argued that the SEC should wait for an ongoing public consultation to conclude before approving the competitor's products. The report quotes the letter as saying that approving the notice would answer questions before the public had analysed them and had the chance to give its views on pending issues on which the notice depends.

The report describes the episode as a reversal of positions in the sector. Cboe and CME Group had previously criticised the Commodity Futures Trading Commission for allowing prediction-market products to trade with minimal scrutiny, a comparison drawn to the disadvantage of the SEC, whose approval process is described as slower and more rigorous.

At the centre of the conflict is a division of jurisdiction between the two agencies. Kalshi operates its contracts under CFTC supervision, which classifies prediction markets as derivatives exchanges, while Cboe has sought SEC approval for its new binary options linked to corporate performance.

At a CFTC event held in the week before the report was published, Cboe chief executive Craig Donohue said the commission had taken on legal risks by assuming responsibility for products that, he said, should fall under SEC jurisdiction. Donohue said those are risks that do not promote safety and soundness, that they do not protect customers, and that they do the opposite of what he believes is the spirit of the meeting: promoting legal certainty, protecting customers and offering them a safe environment in which to trade. At the same event, Kalshi co-founder Luana Lopes Lara debated sector regulation with CME Group chief executive Terry Duffy. A Kalshi spokesperson declined to comment beyond the company's public documents.

Prediction markets began as platforms for betting on elections and economic indicators but have expanded into sports and, more recently, corporate events that had until then been the domain of traditional exchanges. Kalshi already offers contracts linked to what it calls key performance indicators of listed companies, terminology Cboe has also adopted for its new products. Among the contracts available on the platform are bets on the content of statements by Nvidia executives on earnings calls and on the size of the company's workforce in the current fiscal year. Donohue said at the CFTC event that securities markets have historically been oriented towards protecting individual investors and retail clients.

Alongside its request to the SEC to block Cboe's products, Kalshi has asked the CFTC to approve new perpetual equity futures contracts. The report says these products could compete with one of Cboe's most popular offerings, options linked to the S&P 500 index. In a statement released on Friday 16 August announcing the new products, a Kalshi spokesperson said the company did not need SEC approval.