Kalshi wants federal regulators to tackle manipulation in prediction markets by going after misconduct and restricting specific traders, rather than placing sweeping limits on event contracts.

In August 27 written comments, KalshiEX LLC responded to issues aired during the Commodity Futures Trading Commission’s inaugural Innovation Advisory Committee meeting on August 20.

The federally regulated exchange concentrated on manipulation, so-called mention markets and questions over whether event contracts connected to corporate results might come under securities rules.

Kalshi, founded in 2018 and designated by the CFTC as a contract market in November 2020, said regulators should treat manipulation much as they would on established exchanges.

“The existence of manipulation and similar trading misconduct on exchanges should lead us to work harder to root out that misconduct, not to ban or restrict legitimate trading on the platform,” Kalshi said.

CME Group’s Terry Duffy had questioned the rapid pace of event-contract self-certifications and warned that some products could be manipulated during the committee meeting.

Kalshi responded that prediction exchanges already face CFTC anti-manipulation requirements alongside surveillance, compliance and disciplinary obligations. The company said its own monitoring has identified suspicious activity for investigation and CFTC referral, while disciplinary cases have included trades valued below $100.

“The solution is to continue pursuing bad actors, not to close markets or delist contracts that innocent market participants, by their own revealed preferences, value a...