Brian Quintenz, the former CFTC commissioner who sits on Kalshi's board, walks through the exchange's first lifetime ban, the appeals-court ruling that its sports contracts are bets rather than swaps, and where the line on prediction markets should be drawn. The conversation runs from who can bring a criminal case to why corn contracts were once called gambling, and ends on the markets that pay out on what a public figure says.
👤 Guest: Brian Quintenz, former CFTC commissioner and a board member of Kalshi Exchange since 2021, previously head of policy for a16z crypto and now advising finance and technology companies
🎙️ Hosts: Tim Stenovec, who co-hosts Bloomberg Businessweek on Bloomberg Television and Bloomberg Radio, and Kristine Aquino, managing editor of Bloomberg's Markets Live
📰 Published: 31 August 2026 on Bloomberg Podcasts
🔴 YouTube | 🟢 Spotify | 🟣 Apple Podcasts | 🔗 Episode page | ⏱️ 12 min
Key Takeaways
The lifetime ban was a penalty for the response to being caught, not for the trade
"Well, I think in this case, what we saw was a deliberate lack of cooperation."
The show said the exchange announced the action on Monday, "along with a fine of over $71,000"
An exchange is judged on whether it catches misconduct, not on whether misconduct happens
"We can't live in a Minority Report society where we just expect nothing bad to ever happen."
Only the Justice Department can bring a criminal case, and it goes by the size of the damage
"And obviously fraud is a lot easier to prosecute than manipulation."
He says the Ninth Circuit added confusion rather than clarity, and that it agreed with the Third Circuit on the part that matters
Both courts read the Commodity Exchange Act to preempt states from dictating what a federally regulated exchange may list
The distinction he cannot reconcile: whether the Super Bowl happens is an event, who wins it is not
"And I can't necessarily comport those two things."
His line between a bet and a market is who the customer trades against
"So I view betting as something you do against the house, where the house always wins, it sets the odds, its incentives conflict with its customers, right?"
The states and casinos are arguing for an outcome in which only they can host the activity
Kalshi's position is that the same contracts can also be listed federally, under CFTC rules
Corn contracts were called gambling too, when they moved out of the bucket shops onto federally regulated exchanges
"And they called it gambling."
The law never set a test of how economically useful a derivative has to be
Thousands of listed products never find liquidity and get delisted, he said
The 21-year-old betting age comes from liquor licensing, not from the activity
Rhode Island, Washington, D.C., Montana and Wyoming all set the threshold at 18
Mention markets are already everywhere, because the stock market is one
"But to your point, I think when the Fed chairman has a news conference, the entire stock market turns into a mention market."
Where the line goes is a question for Congress, not for the regulator
"I'd like to start broader than narrower, and then we can let Congress come in and decide."
Kalshi's First Lifetime Ban Was for Refusing to Cooperate, Not for the Trade
The interview opens on Kalshi barring former congressman George Santos for life, which the hosts said followed allegations that he manipulated wagers on his own attendance at this year's State of the Union address. The show said the company announced the action on Monday, "along with a fine of over $71,000", and asked what it takes to get banned from the platform.
The conduct was not what earned the lifetime term; the refusal to engage with the investigation was. "Well, I think in this case, what we saw was a deliberate lack of cooperation."
"And if you're not going to respect the enforcement process after you've been caught doing something bad, why should we think that you're going to respect the market integrity if you're allowed to trade again?"
"So in this case, I think a lifetime ban was very appropriate."
The standard he holds an exchange to is detection and referral, not prevention. "We can't live in a Minority Report society where we just expect nothing bad to ever happen."
The job, as he described it, is that "it's important that the exchange prosecutes that, surveils it, finds it, discovers it, refers it to the CFTC"
He expects the deterrent effect to build with repetition: "And the more examples we see of these kinds of things happening, hopefully the more of a prophylactic impact it has to prevent it from happening again in the future."
Asked how effective the ban will be as a precedent, he answered by lowering the expectation. "You never want to see people violate the rules or unethical people try to compromise market integrity. But the reality is that it happens."
Kalshi Fines, the CFTC Brings Civil Cases, and Only the Justice Department Can Prosecute
One of the hosts cut in to establish that the penalty was a civil matter rather than a criminal one, and Quintenz laid out the three-step chain.
Three bodies, three powers. "Well, yeah, Kalshi can enforce the rules on its own exchange. The CFTC, as the regulator, can enforce civil penalties, but it would be up to the DOJ to prosecute criminally."
The referral runs in order — the exchange refers to the CFTC, and the CFTC decides whether to take it to the Justice Department. Asked to confirm that sequence, he said "That's correct."
Whether a criminal case follows is a question of scale. "I mean, I think when I was at the CFTC, it always depended upon the impact of the behavior."
Pressed on whether that means the number of people affected and the amount of money, he said "Exactly."
"And obviously fraud is a lot easier to prosecute than manipulation. But certainly manipulation cases were brought by DOJ."
Asked whether criminal prosecutions start to appear in this market, he would say only that it is possible
The Ninth Circuit Said Sports Contracts Are Bets, and He Says the Opinion Added Confusion
The hosts turned to the ruling handed down the previous Friday, in which the U.S. Court of Appeals for the Ninth Circuit held that sports bets are not swaps, and read out Judge Ryan D. Nelson's language: "For Kalshi to deny its sports event contracts are sports bets under a reasonable person's understanding is disingenuous."
His response was that the ruling made the law less clear, not more. "I think the Ninth Circuit opinion provided more confusion than clarity."
He framed the casinos' and states' case as two claims. The first is that states can dictate what contracts a federally regulated exchange lists, and that federal law does not preempt them; the second is that these events are not really events, so the contracts are not swaps
On the first claim the Ninth Circuit went Kalshi's way, agreeing with the Third Circuit. The Commodity Exchange Act, both courts found, "does preempt states from regulating or dictating what kinds of contracts can be listed on federally regulated exchanges"
It is the second claim where he says the reasoning breaks. "But then again, it made the, in my view, I think confusing determination that, for instance, whether or not the Super Bowl occurs is an event, but who wins the Super Bowl is not. And I can't necessarily comport those two things."
He expects the split to be settled above both courts. "Ultimately, this is going to come down to the Supreme Court, and it's going to be an issue that requires their intellectual firepower and patience and discipline and attention to the law, as opposed to working backward from a result."
What Separates a Bet From a Market, in His Telling, Is Who the Customer Trades Against
Asked whether the decision undermines the legal foundation for offering sports markets nationwide, Quintenz answered by defining the two things the court was comparing.
A bet is a transaction against the house. "So I view betting as something you do against the house, where the house always wins, it sets the odds, its incentives conflict with its customers, right?"
An exchange, in his description, is the opposite arrangement: traders engaging with each other, with market prices for outcomes
He says the other side is arguing for exclusivity rather than for a rule. "And I think the other important thing to mention is that the states and casinos are pursuing a zero-sum outcome here."
Their position, as he put it, is that this activity can only happen in a casino or a state-regulated sports book
Kalshi and the CFTC are not contesting that. His framing of their answer is that states can keep their sports books, and that if the same contracts also qualify as derivatives they can be listed on federally regulated exchanges under CFTC rules
Sports Is Not Going on the Back Burner, Because Corn Contracts Were Called Gambling Too
The hosts described the state-by-state litigation as a game of whack-a-mole and asked whether Kalshi ever discusses parking sports and concentrating on everything else. "It seems like the sports question is a real headache for everybody except the lawyers who are working on this."
He did not take the question about setting sports aside; he answered with what the statute permits. "And the law was written very deliberately to say that an event that has any financial, commercial or economic consequence can have a valid derivative listed upon it because it poses risk."
The purpose of derivatives markets, he said, is to allow for risk management and price discovery
He treats the judge's language as a perception problem with a precedent. "But if you go back in time, corn contracts were traded in bucket shops in Chicago. And they sued when corn contracts ultimately got listed on federally regulated exchanges also. And they called it gambling."
The general case he draws from it: take a product out of back rooms and casinos, put it on a federally regulated exchange, and the incumbent business model fights it
Asked whether the CFTC should be the body deciding which event contracts are economically useful enough to qualify, he said it already is. He believes the agency is the ultimate arbiter of what the Commodity Exchange Act says about an event that can qualify as a swap
There is no usefulness test in the law, and he says that is deliberate. "And there has never been kind of a sufficiency test of economic value for any derivative."
The breadth exists to encourage exchanges to innovate, and the market does the sorting — thousands of listed products never find liquidity and are eventually delisted
The 18-to-21 Question, and Why He Says the Age Line Was Never About the Activity
Prediction markets are open at 18 because they are regulated federally as financial markets, while most state-regulated sports books start at 21. The hosts put the gap to him directly, citing a news analysis: "We did see an analysis from CNN that showed users in the 18 to 21 age group have traded $5.4 billion on Kalshi just so far this year." They noted that Novig had launched its exchange with a 21-and-up restriction, and asked whether Kalshi would follow.
He declined to answer for the company. "So I can't speak for the founders or the board at the company level on that. I think that's a good conversation to have internally."
His explanation for where 21 came from is licensing, not the wagering. "And a lot of states have made that decision because you combine casinos with liquor."
The drinking age is 21, so entry to a casino follows it
The state rules are not uniform, and several already sit at 18. "But states like Rhode Island, D.C., where I live, Montana, Wyoming, all have an 18-plus-year-old threshold for that kind of activity."
Mention Markets: the Stock Market Already Is One
The last subject was markets that pay out on whether a public figure says a particular word or phrase in a speech, which the hosts described as a niche corner worth asking about.
He puts the scope of these markets back on the statute. "So again, I think that the breadth of these markets reflects the breadth of the law."
Drawing the line is Congress's job, and he doubts a regulator could do it cleanly. "I mean, the regulator might be able to try, but I think it might be hard to do that in a way that isn't arbitrary and capricious, which is a standard under the Administrative Procedures Act and how agencies can make decisions."
His argument that these markets are not a novelty is that the biggest one already works this way. "But to your point, I think when the Fed chairman has a news conference, the entire stock market turns into a mention market."
People who say certain things in a high-publicity way can move prices by what words they use, he said
What he says the contracts produce is data. "And ultimately, these markets are gauges. They're gauges of opinion. They're gauges of sentiment."
His worked example: "If President Trump only mentions Iran one time in a news conference as opposed to the prior time where he mentioned it 10, does that indicate anything?"
And if the count goes to zero at the next appearance, "does that create an appearance, or a— you know, a correlation that needs to be paid attention to"
He would rather the boundary start wide and be narrowed later. "So ultimately, it's hard to draw lines in this space. I'd like to start broader than narrower, and then we can let Congress come in and decide."
Quintenz's bottom line is that prediction markets are as broad as the Commodity Exchange Act was written to be, that the question of whether a sports contract is a swap is now heading to the Supreme Court rather than being settled circuit by circuit, and that Kalshi's job in the meantime is to catch the people who abuse its rules and refer them on.
Products, Companies & Tools Mentioned
Kalshi (The CFTC-regulated exchange whose board he has sat on since 2021; it issued its first lifetime ban, and he says the penalty followed "a deliberate lack of cooperation" rather than the rule violation alone)
Commodity Futures Trading Commission (His former regulator, and the body he says can bring civil penalties and decide what to refer onward — and, in his view, the ultimate arbiter of what qualifies as a swap)
Department of Justice (The only body that can prosecute criminally, and one he says weighs an order of magnitude of impact before it does)
Novig (The rival exchange that launched with a 21-and-up restriction, raised by the hosts as the age precedent Kalshi could follow)
Books & Resources Mentioned
KalshiEX, LLC v. Assad (The Ninth Circuit opinion handed down the previous Friday, holding that sports event contracts are not swaps; the source of the "disingenuous" line the hosts read to him)
KalshiEX LLC v. Flaherty (The Third Circuit decision that went Kalshi's way, and which he says the Ninth Circuit agreed with on federal preemption)
The Commodity Exchange Act (The statute the whole argument runs on — written broadly enough, he says, that any event with financial, commercial or economic consequence can carry a derivative)
Young adults under 21 traded $5 billion on Kalshi this year, amid prediction market frenzy – CNN (The analysis the hosts cited in the question about whether Kalshi should move to 21 and up)
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