Want to Short a Stock? Kalshi and C.T.F.C. Allow It as Perpetual Trades.

In late April, Kalshi, the world’s largest prediction market, invited a big crowd to a posh event to launch a new type of trading that would allow customers to wager on cryptocurrencies they did not own.This type of trading had never before been permitted in the United States.But Kalshi was so confident that it would win approval from its regulator, the Commodity Futures Trading Commission, that it booked the event before it had even put in its formal application.

After all, the agency’s chairman, Michael S.Selig, had repeatedly signaled that he was a prediction markets booster.When the C.F.T.C.

did not move fast enough, Kalshi was forced to cancel the gathering at a glass-domed Brooklyn penthouse with sweeping views of the Manhattan skyline.And the firm’s chief executive, Tarek Mansour, called Mr.

Selig to complain, according to three people with knowledge of the call who spoke on the condition of anonymity to describe a private conversation.But Kalshi just needed to be patient.Mr.

Selig’s support was never in question.In a series of decisions from May onward, he reversed years of agency policy and gave Kalshi what it wanted: permission to let customers bet on the prices of individual stocks, cryptocurrencies or other assets without buying them or being forced to settle up by a specific date.Now, for example, clients could simply wager that the price of shares of ExxonMobil would fall and then get paid if it did.It was the first time the trades, called perpetuals, were permitted to be offered to American customers.

And the agency’s authorizations immediately infuriated officials at some of the nation’s largest trading exchanges who saw Kalshi as a privileged new competitor.Two powerful clearinghouses — the Chicago Mercantile Exchange and Cboe Global Markets — have filed suit against the agency, claiming that giving prediction markets this leeway violates federal laws designed to protect investors from insider trading, market manipulation and ot...