The Commodity Futures Trading Commission (CFTC) unveiled its Innovation Advisory Committee (IAC) earlier this year, which is packed full of executives of derivatives exchanges, crypto trading companies, and prediction markets and sportsbook leaders.
That committee held its first meeting on Thursday, Aug. 21, and saved the prediction markets chat until last. From verbal sparring to “fake news”, here are six items that stood out from the discussion.
CME Group’s Terry Duffy vs. the ‘carnival barkers’
The most combative speaker of the day was CME Group Chairman and outgoing CEO Terry Duffy, who verbally sparred with both CFTC Chairman Michael Selig and Kalshi co-founder Luana Lopes Lara during the prediction markets panel. Duffy has been vocal in recent weeks about his reservations over aspects of prediction markets such as the expansion into sports, and he voiced concern again, suggesting that market manipulation is not being appropriately managed by the CFTC.
“There’s been 2,500 self-certifications since this administration has taken office in January of 2025, of which none have been opposed,” Duffy said. “… There’s a lot of things that are susceptible to manipulation. There are some sporting events that are not just outcome-based, they’re individual-based. There are definitely people that are manipulating these contracts. That is horrible for our industry. We’re not a bunch of carnival barkers at a circus.”
Duffy named Kalshi a couple of times during his comments, and Lara challenged him at the first opportunity, asking whether CME has ever had issues with market manipulation.
“If you’d like to have a debate, I’m happy to have a debate with you,” Duffy responded, adding that CME Group has more people in its regulatory department “than you have in your entire company.”
They then bickered for a few seconds before being interrupted. “Maybe you should learn about efficiency, then,” responded Lara. “Maybe you should learn about credible markets,” Duffy fired back.
Selig cries ‘fake news’ but check the ledger
In his talk of market manipulation, Duffy referred to two specific incidents:
- The trading on the future of Venezuela President Nicolás Maduro earlier this year
- Donald Trump’s teleprompter operator’s bets on what the president would say during his speeches
Within seconds of Duffy bringing up those incidents, Selig interjected to state that those trades did not happen on CFTC-registered exchanges. “I want to correct the record there: Those products are not listed in the United States,” Selig said. “They never were. Those were offshore, and that’s fake news.”
Duffy responded by labeling Selig’s rebuttal “a cute comment.”
While the Maduro-related trading that hit headlines happened on Polymarket’s global platform, the Trump teleprompter trades happened on Kalshi and were, according to the company, reported to the CFTC. Kalshi still offers ‘mention markets’ on President Trump comments as of the time of writing. Lara said at one point on Thursday that the company will publish a study assessing how such markets like those move the needle on the stock market.
Everyone seems to know ‘mention markets’ are problematic
So-called ‘mention markets’ were perhaps the biggest topic of the prediction markets section of the meeting. While some speakers like Robinhood CEO Vlad Tenev acknowledged they can be “fun”, almost every person who discussed them agreed with Duffy to some extent that they are one of the most potentially problematic categories.
“On the other hand, certain mention markets are very prone to manipulation, and I don’t think that it’s necessarily even conscious or intentional,” added Tenev. “… It doesn’t feel like we have the right line in how we think about things like mention markets.”
Polymarket founder and CEO Shayne Coplan directly referenced the Maduro furor.
“When we think about the Maduro thing and these things around the edges, yeah, those are problems,” he said. “When that happened, we worked with the commission, we worked with law enforcement … When you’re building something new and you’re innovating, as things pop up, you have to deal with problems that come up appropriately and diligently and seriously, and you have to engage. No one is here saying, ‘Hey, we don’t want to be held accountable for mistakes or missteps.'”
As well as ‘mention markets’, there are what you might call ‘appearance markets’. Don Wilson, founder of trading firm DRW, referenced another scandal, wherein former Congressman George Santos paid a $35,000 settlement after an investigation into suspicious trades made on Kalshi related to whether or not he would appear at the State of the Union address.
“The contract, ‘Will George Santos attend the State of the Union,’ was readily susceptible to manipulation and had no real value,” Wilson said. “I would argue that never should have been listed in the first place. And I think there are a bunch of other things in that category that just don’t meet the bar, and just should not be listed. It’s in everybody’s benefit in this room that we cut that bottom tier of things out.”
Sportsbook CEOs take a quiet tack
As well as CEOs and other executives from traditional trading firms and new-school prediction market platforms, several sportsbook operators that now also offer event contracts are on the IAC and were at the meeting. But as others trumpeted the CFTC’s federal authority on event contracts including sports, those with state-regulated interests remained largely quiet.
DraftKings co-founder and CEO Jason Robins‘s main contribution was to speak up after the Duffy vs. Lopes bout to urge people to stop “taking shots at each other’s business models or decisions that you may not 100% agree with,” arguing that it is counter-productive and does little more than create divisions.
New FanDuel CEO Christian Genetski and Fanatics Betting & Gaming CEO Matt King made brief comments about the need to build trust and protect consumers by constructing, in Genetski’s words, “clear rules of the road.”
Largely, though, the gaming CEOs left the debate and discussion to the crypto leaders and the exchange executives.
Selig might be feeling the court heat
After various Congressional hearings, the CFTC’s first meeting of its IAC continued the public conversation around prediction markets at a time when several of the committee’s members are fighting against state governors, attorneys general, and regulators in court.
The pendulum seems to be swinging away from prediction market platforms and the CFTC in favor of states. While the federal side has won relief in some court cases, the preliminary injunctions against the likes of Kalshi are stacking up.
Selig referenced these battles in his introductory comments and at multiple times during the meat of the meeting. But it’s perhaps his closing remarks that best illustrated the fact that what the courts ultimately decide will have a seismic impact on prediction markets’ future.
“We’ve got to make sure we win in court because if we get judges that overturn some of this stuff, it’s really problematic,” concluded the CFTC’s one-man commission. “So I think it’s great to have everyone in this room working together.”
‘Exclusive authority’ remains the party line
Unsurprisingly, in a room full of people whose businesses are registered with and regulated by the CFTC, the pervasive idea that event contracts should be regulated at the federal level was front and center.
Selig, who is currently the only commissioner at the federal agency, drew the battle lines in his opening comments.
“Although Congress gave the CFTC the exclusive authority to regulate DCMs that offer trading and derivatives, many states seek to nullify federal law and apply state anti-gaming law to DCMs,” he told the room.
That was echoed emphatically by Coinbase CEO Brian Armstrong, whose company is one of several prediction market platforms embroiled in litigation with multiple states.
“The federal law is unambiguous here that the CFTC has exclusive jurisdiction,” said Armstrong. “Congress has said so explicitly, and we really appreciate you defending that territory even in the face of litigation.”
The biggest court battler, Kalshi, was represented at the meeting by Lara. She opined that she has “never heard a single argument” for state-by-state regulation having better consumer protections than a federal framework, and went as far as to claim that “very few states” actually rules in place around advertising to minors or self-excluded people.
“I think this is an opportunity for the CFTC to yet again show we can be great at consumer protection,” Lara added.
