Prediction marketplace Kalshi is reportedly in early, informal talks with investment banks about an initial public offering (IPO), despite growing regulatory scrutiny of sports betting deals on these platforms.

Kalshi is in preliminary talks to go public via an initial public offering after the platform surpassed $2 billion in annual revenue, unidentified sources familiar with the matter he said According to Friday’s report, The Informant daily.

A spokesman for Kalshi declined to comment on the matter.

Reports of IPO discussions come at a time when sports betting contracts account for more than half of Kalshi’s weekly nominal trading volume, even as those markets face growing legal challenges from US states.

Sports betting contracts were Kalshi’s leading category, representing approximately 53% of its weekly nominal trading volume, According to to Dune data. Sports betting was also the leading category on Polymarket, accounting for approximately 69% of its weekly trading volume.

As Cointelegraph reported on May 7, Kalshi doubled its valuation to $22 billion after closing a $1 billion Series F financing round led by Coatue Management.

Weekly nominal Kalshi volume by category. source: Dune

US regulators are cracking down on contracts in the sports forecasting market

Kentucky is the latest state to sue five prediction markets, including Kalshi and Polymarket, accusing them of “operating unlicensed and illegal sports betting and gambling platforms,” ​​Cointelegraph reported Thursday.

Related: Polymarket Users Cry After Strategy Selling Market Decides ‘No’

At least 17 other states have taken prediction market operators to court, drawing involvement from the U.S. Commodity Futures Trading Commission (CFTC).

State governments argue that sporting event contracts require state-level licensing, while forecast markets argue that their event contracts are swaps regulated under federal commodities law.

The CFTC also argued that event contracts qualified as “swaps” because they were based on binary events. On May 14, the CFTC issued a no-action letter in an effort to relax event contract reporting rules.

CFTC No Action Letter on Prediction Markets. Source: CFTC.gov

To consolidate its power over forecast markets, the CFTC has sued at least five states, including Wisconsin, New York, Arizona, Connecticut and Illinois.

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