Prediction market platform Kalshi ended its advisory contract with Donald Trump Jr. in response to his venture capital firm, 1789 Capital, also holding a stake in rival platform Polymarket, according to Kalshi's spokesperson.

It was a mutual arrangement and conversations on Trump Jr.'s exit began in August after 1789 announced a major stake in Polymarket, the spokesperson said. Both the platform and Trump Jr. agreed it was a conflict of interest to keep the president's son as an advisor while serving as a top investor for Polymarket, the spokesperson added.

Trump Jr.'s departure comes after Democrats secured a majority across the House and the Senate, with the party expected to crack down on the prediction market industry. While Trump Jr. has exited Kalshi, he still serves as an advisor to Polymarket. His ties to the industry could make prediction markets an easy target for lawmakers to go after, Joseph Konizeski, a former trial attorney in the CFTC, previously told CNBC.

In early October, Kalshi CEO Tarek Mansour said on MS NOW that Trump Jr.'s connection to the company creates an "optics issue," but added that it has never used that relationship to gain favor with the U.S. government.

Disclosure: CNBC and Kalshi have a commercial relationship that includes customer acquisition and a minority investment.