The Commodity Futures Trading Commission (CFTC) on Tuesday sternly wagged a finger at prediction markets operators over repeated insider trading on “mention markets” in recent months.
A CFTC advisory letter from its Division of Market Oversight (DMO) emphasized to Kalshi, Polymarket, and others that if the companies fail to sufficiently vet such markets for potential manipulation, the regulator might take action by rejecting one of the self-certified event contracts for the first time.
“There’s effectively a presumption against these contracts,” CFTC Chairman Michael Selig said Wednesday on CNBC. “We’re going to hold them to a high standard.”
The letter, though, carries no legal weight and appears to change nothing about the CFTC’s hands-off approach to policing event contract markets, even making clear that the policy only applies to one area of the commission.
“This advisory is not intended to, does not, and may not be relied upon to create any new binding rules or regulations, or to amend existing rules or regulations. This advisory represents only the views of DMO staff and does not necessarily represent the views of the Commission or of any other division or office of the Commission,” the letter reads in part.
In the advisory, the DMO defines mention markets as those “based on whether an individual will say or ‘mention’ certain words, attend or appear at an event, or otherwise interact with another person.”
“As the settlement of contracts in Mention Markets may be controlled by a single individual, a small group of individuals, or persons with access to or influence over the individual whose words, attendance, or interaction determines settlement, DMO staff may view Mention Markets as presumptively readily susceptible to manipulation and accordingly expect a heightened showing in support of any submission seeking to list such contracts.”
Trump, Santos cases precede CFTC letter
High-profile cases of mention-market manipulation or abuse by politicians closely precede the CFTC advisory.
Most recently, Gabriel Perez, a teleprompter operator for U.S. President Donald Trump, settled with the CFTC after the regulator found at least 14 instances of cheating on Kalshi. Perez enjoyed advance access to Trump’s scripted speeches and repeatedly used that information to profit in markets about what words Trump might use in his remarks.
Perez received a fine of roughly half of the amount he profited through his cheating, as well as a three-year trading ban.
Santos also receives light touch
Former Rep. George Santos, a convicted felon who received a commutation of his prison sentence by Trump, also settled CFTC allegations of market manipulation.
The regulator alleged Santos used social media posts to sway Kalshi markets about whether he would attend the State of the Union address in 2026. An investigation concluded that Santos wagered repeatedly in those markets that involved only his own actions.
Santos paid a $35,000 fine and also accepted a three-year trading ban.
Will CFTC talk lead to action?
These notable settlements with prominent political figures led to a warning of potential penalties instead of action to prevent future violations, as might happen in more traditional state-level gambling regulation.
“We’re not going to prejudge what comes in the door,” Selig said. “If the exchanges believe that these contracts are not readily susceptible to manipulation, we’ll review that. We of course have the ability to reject those contracts if we disagree.”
To date, though, the CFTC has not rejected any self-certified event contracts during the Trump administration. Selig’s oft-stated philosophy of using a “minimum effective dose” of regulation leaves prediction markets operators able to test unclear boundaries in mention markets and similarly manipulable contracts.
“This advisory is informational and does not create new obligations, nor supersede the Act or Commission regulations thereunder. Registered entities making event contracts available on their platforms remain responsible for ensuring that all contracts listed or traded comply with applicable statutory and regulatory requirements,” the letter reads.
