U.S. regulator warns about cheating risks in 'mention markets' on prediction platforms
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U.S. regulator warns about cheating risks in 'mention markets' on prediction platforms
The Commodity Futures Trading Commission issued a new advisory to flag the unique dangers of markets based on individuals' behavior.
By Jesse Hamilton|Edited by Cheyenne Ligon
Updated 12 hours agoPublished 14 hours ago
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The U.S. Commodity Futures Trading Commission has offered a caution about so-called mention markets. (Jesse Hamilton/CoinDesk)
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The U.S. Commodity Futures Trading Commission issued an advisory that puts prediction market platforms on notice for “mention markets” that might be vulnerable to manipulation.
The agency isn’t banning such trading contracts, but it’s suggesting a high bar for allowing those bets.
Popular betting on what an individual might say or do, known as "mention markets," pose some special dangers in the eyes of the U.S. regulator overseeing prediction market firms such as Kalshi and Polymarket.
An advisory issued by the Commodity Futures Trading Commission (CFTC) on Tuesday may narrow the window on event contracts that would otherwise clear the agency's supervisory hurdles.
This category of wagering isn't like other markets featuring "independently generated, externally verifiable outcomes that are outside the control of any single person," said the CFTC’s staff advisory. Instead, the agency noted, the outcome pivots on "the discrete conduct of a named person, and that conduct may be neither independently generated nor externally verifiable."
Basically, the individual or people around the person could shift the outcome based on their own knowledge of the betting. The CFTC's Division of Market Oversight, which watches the prediction market sector, may see these markets as "presumptively readily susceptible to manipulation," according to the advisory. To that end, the CFTC reminds prediction platform operators that they're only allowed to trade "derivative contracts that are not readily susceptible to manipulation."
Instead of outright blocking mention markets — such as the current Kalshi trading on what U.S. President Donald Trump will say at the United Nations — the agency suggested a tight leash. It outlined a list of factors that might support a contract designed well enough to limit the chances of manipulation. Were such markets to pass muster, the agency suggested they'd need to feature "independent verifiability and substantial public scrutiny as essential attributes."
The CFTC offered some elements that might strengthen a contract, which it said should be considered and outlined in the platform’s regulatory filing:
External factors that would make it hard or prohibitively costly for the individual to game the market;
The focus of the betting can't be influenced by public pressures;
The market revolves around a formal, public setting involving a public person;
The betting scenario is closely monitored for signs of manipulation.
The regulator has already targeted illicit betting in these markets with a recent enforcement order, penalizing a former teleprompter operator for Trump at the White House, who was making bets on what he knew the president was planning to say.
In another high-profile example of an individual manipulating markets based on their own conduct, Kalshi recently issued a lifetime trading ban on former U.S. Representative George Santos after accusations he wagered money on his own State of the Union speech appearance.
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