CFTC Puts Prediction Markets on Notice Over Manipulation Risks

The regulatory advisory, issued by the Division of Market Oversight on September 22, targets so-called mention markets—products where payouts depend on whether a person says a specific phrase, attends a public event, or interacts with another individual. While the guidance does not function as a blanket ban, it establishes a high hurdle for exchanges, which must now prove their contracts can withstand potential interference from those controlling the outcomes.

Regulators pointed to two recent enforcement actions to justify the heightened scrutiny. In August, former White House teleprompter operator Gabriel Perez was ordered to pay over $170,000 in disgorgement and penalties for trading on advance knowledge of presidential speeches. Similarly, the commission penalized former Representative George Santos earlier this year for trading on markets tied to his own attendance at the State of the Union address. These cases underscore the ease with which insiders or individuals with direct control over a result can exploit prediction platforms.

Moving forward, exchanges must demonstrate how they plan to mitigate these risks, including the assessment of fiduciary or legal duties that might discourage participants from manipulating events. Although platforms like Kalshi continue to host certain mention-based markets, the advisory signals that future product filings will require exhaustive proof that the exchange can effectively monitor for nonpublic information and deliberate attempts to influence settlement outcomes. The CFTC emphasized that independent verification of events remains a central requirement for any product seeking to clear federal integrity standards.