The U.S. Commodity Futures Trading Commission has issued guidance warning prediction market operators that contracts tied to a specific person’s statements or actions can carry elevated manipulation risks.
Known as “mention markets,” these contracts let traders speculate on what an individual will say or do. The CFTC said such markets differ from contracts based on outcomes that are independently produced and can be verified through external sources.
In an advisory released Tuesday, the agency said the result of a mention market can depend directly on the conduct of a named individual. Because that person may have the ability to influence the outcome, the result may not be independently generated or externally verifiable.
The CFTC’s Division of Market Oversight could therefore regard these contracts as “presumptively readily susceptible to manipulation,” according to the advisory. Prediction market operators, including platforms such as Kalshi and Polymarket, are required to ensure that the derivative contracts they list are not readily susceptible to manipulation.
The agency stopped short of calling for a blanket prohibition on mention markets. Instead, it outlined characteristics that could help platforms demonstrate that individual-based contracts have adequate safeguards against manipulation.
The CFTC said independent verification and significant public scrutiny would be important features for contracts involving individual behavior. Platforms should consider several factors when developing and submitting these markets for regulatory review.
Among the factors identified by the agency are:
- Outside circumstances that make it difficult or prohibitively expensive for the individual to manipulate the result.
- A structure that limits the ability of public pressure to influence the person’s conduct.
- A formal, publicly observable setting involving a public figure.
- Continuous monitoring of the market for potential manipulation.
The warning follows enforcement action involving alleged misuse of inside knowledge. In a recent order, the CFTC penalized a former White House teleprompter operator who traded on information about what Trump was expected to say.
Kalshi has also taken action in a separate case involving former U.S. Representative George Santos. The prediction platform issued Santos a lifetime trading ban following allegations that he placed wagers related to his own appearance during a State of the Union address.
The new advisory highlights the additional regulatory challenges faced by prediction markets when contract outcomes depend on the actions of individuals who may possess information about, or influence over, the event being traded.
