CFTC Issues Warning on Prediction Contracts Tied to Individual Behavior

The Commodity Futures Trading Commission has issued new guidance on prediction markets tied to the actions of individual people, warning that these contracts can present a higher risk of manipulation.

“Mention markets” allow traders to take positions on what a named individual will say or do. The CFTC said these contracts differ from markets where outcomes are produced independently and can be confirmed through external sources.

The agency’s staff advisory, released Tuesday, said a contract based on an individual’s conduct can be difficult to treat as independently generated or externally verifiable because the person involved may directly affect the result.

The CFTC’s Division of Market Oversight said these contracts may therefore be considered “presumptively readily susceptible to manipulation.” The agency reminded prediction platforms such as Kalshi and Polymarket that derivatives offered for trading must not be readily susceptible to manipulation.

The guidance does not prohibit these markets. Instead, the CFTC described features that could help platforms reduce the possibility of manipulation when designing contracts and presenting them for regulatory review.

The agency said strong independent verification and substantial public scrutiny should be central to contracts based on individual behavior. It also highlighted several factors platforms should take into account:

• Outside conditions that make manipulating the outcome difficult or prohibitively costly.
• Restrictions that reduce the ability of public pressure to influence the individual’s actions.
• A formal public setting involving a public figure.
• Active monitoring for unusual activity or potential manipulation.

The CFTC’s guidance comes after recent enforcement involving a prediction market contract and access to nonpublic information. The agency penalized a former White House teleprompter operator for placing trades based on knowledge of what President Donald Trump was expected to say.

Kalshi has also addressed alleged self-trading by banning former U.S. Representative George Santos for life. The platform took the action following allegations that Santos wagered on the outcome of his own appearance at a State of the Union address.

The latest advisory makes clear that prediction contracts involving individual conduct can receive additional scrutiny when the person at the center of the market may have advance knowledge of the event or the ability to influence its outcome.