CFTC issues a warning about prediction markets! "Mention betting" carries a high risk of manipulation and should only be offered in limited circumstances.

The U.S. Commodity Futures Trading Commission (CFTC) staff warned in new guidance that prediction market trading involving bets on what prominent people might say in public carries a high risk of manipulation and should only be offered in limited circumstances. The guidance is the latest move by regulators to rein in the explosive growth of the prediction market industry. It follows a June CFTC proposal aimed at cracking down on bets related to war and terrorism. The new guidance does not carry the legal force of a formal agency rule and applies to a relatively niche corner of prediction markets, where users can trade "yes" or "no" on future events such as sports and politics. So-called "mention markets" involve bets on words or phrases people might say during speeches, earnings calls or post-game press conferences. "These contracts present heightened manipulation risk because their settlement depends on the specific conduct of an individual, which may be neither independently generated nor externally verifiable," the CFTC said Tuesday in a statement. The guidance noted that obtaining speech drafts, prepared remarks or non-public content creates a trading advantage and said this "makes the individuals involved more susceptible to others seeking to manipulate the outcome, whether through social engineering, inducement or public pressure campaigns." "mention markets" betting was at the center of a CFTC investigation into the trading activity of a White House teleprompter operator. The individual was accused of using inside information to bet on what U.S. President Donald Trump would say in speeches on the prediction market platform Kalshi, earning more than $100,000 in profit. In August, he agreed to pay more than $172,000 to settle the regulator's allegations without admitting to the CFTC's claims against him. The National Football League (NFL) asked the CFTC in July to ban such bets in sports, saying wagers on broadcast mentions and similar bets can easily be manipulated by a single person. Major League Baseball (MLB) has also called on the CFTC to tighten restrictions on bets about words spoken at press conferences or post-game interviews. The guidance laid out limited circumstances in which such trading would be permitted, including safeguards against potential manipulation, such as whether the individual involved in the bet bears any legal or professional obligation to refrain from influencing the outcome. The guidance also said any exchange offering "mention markets" must implement rules, surveillance mechanisms and controls to detect and curb manipulative conduct. The CFTC is facing criticism that its supportive stance toward federally regulated prediction markets has allowed betting activity to flourish, even in states that prohibit gambling. The CFTC and prediction market platforms argue that these event contracts are financial derivatives fundamentally different from traditional gambling and should therefore be regulated by the agency. States dispute this and have sued the companies, alleging the platforms effectively constitute illegal gambling operations. Both Kalshi and Polymarket have said they oppose insider trading and actively monitor their markets, while providing leads to law enforcement and federal regulators.