Kalshi Referred to Regulators Over Influencer Ad Practices

The Better Business Bureau’s (BBB) National Advertising Division (NAD) has referred prediction market platform Kalshi to regulators after the company declined to participate in an inquiry into its advertising practices. The investigation centered on whether Kalshi and its influencers adequately disclosed paid relationships in accordance with Federal Trade Commission (FTC) guidelines.

According to a statement released Monday, the NAD will notify relevant state Attorneys General and social media platforms used for Kalshi’s campaigns, escalating the matter to potential enforcement action. Kalshi’s decision not to engage in the voluntary self-regulation process has drawn sharp criticism, especially as the company has leaned heavily on social media marketing to fuel its rapid growth.

Kalshi, founded in 2018 and regulated by the Commodity Futures Trading Commission (CFTC), operates a federally approved prediction market where users trade on the outcomes of real-world events, such as election results or Federal Reserve decisions. Its business model has been under intense scrutiny recently, with watchdog organizations like Media Matters raising concerns over its aggressive marketing targeting younger demographics on TikTok and Instagram. Viral campaigns have promoted prediction trading as a “side hustle,” raising questions about the clarity of financial risk disclosures.

Regulatory Challenges Amid Explosive Growth

Kalshi’s advertising issues emerge against a backdrop of remarkable growth. As of May 2026, the company secured $1 billion in fresh funding, doubling its valuation to $22 billion in just five months. Kalshi has also reported an annualized revenue run rate exceeding $1.5 billion, underscoring its expanding influence in both retail and institutional markets. This momentum has positioned Kalshi as a leader in centralized prediction markets, outpacing its decentralized competitor, Polymarket.

Despite its success, Kalshi faces mounting regulatory hurdles. In the United States, it has been embroiled in disputes with state regulators over the legality of event contracts, while internationally, Spain recently ordered the platform blocked for operating without a gambling license. The latest referral to U.S. regulators further complicates its regulatory standing, with potential ripple effects for its marketing partnerships and user acquisition strategy.

Impact on the Prediction Market Sector

The referral highlights the broader challenges prediction markets face as they navigate regulatory frameworks that were not designed with this asset class in mind. Analysts at Bernstein recently noted that the sector is entering an “institutional era,” pointing to Kalshi’s introduction of block trading and bespoke contracts as a sign of growing sophistication. However, allegations of insider trading and opaque marketing practices threaten to undermine the credibility of the space just as institutional interest is picking up.

For traders, Kalshi’s regulatory challenges are a double-edged sword. On the one hand, increased scrutiny may lead to stricter compliance, potentially enhancing trust in the platform over time. On the other, ongoing legal battles could hamper innovation or delay new product launches like its recently announced “American Power Index,” a political analytics tool unveiled in May.

As regulators evaluate Kalshi’s advertising practices, the company’s next moves will be closely watched, particularly given its outsized role in shaping the prediction market sector. Whether this referral results in enforcement action or compliance improvements will likely have significant implications for the trajectory of event-based trading.

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