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- The U.S. Commodity Futures Trading Commission warned regulated prediction markets that contracts tied to what a named person says, does or attends carry heightened manipulation risk.
- The Sept. 22 staff advisory states that exchanges should assess obligations constraining the person controlling the outcome and consider safeguards like restricted-participant lists and insider screening.
- The advisory stops short of banning mention markets following two recent CFTC enforcement actions involving event contracts in August and July.
The U.S. Commodity Futures Trading Commission has warned regulated prediction markets that contracts tied to what a named person says, does or attends carry heightened manipulation risk and may require stronger safeguards.
The Sept. 22 staff advisory covers so-called mention markets, including contracts based on specific words, attendance at events and interactions between people. CFTC market-oversight staff said such products may be considered readily susceptible to manipulation and can meet existing requirements only in limited circumstances with appropriate controls.
Contracts Controlled by One Person Face Higher Scrutiny
Most event contracts settle using independently generated outcomes outside the control of one person, such as economic data or election results.
Mention markets differ because a named individual or small group may be able to determine the result directly. The CFTC gave the example of a podcast host whose use of a particular phrase could settle a contract, while people with access to scripts, prepared remarks or guest lists may know the outcome before the public.
Contracts involving private settings, non-public individuals or outcomes that lack independent verification and substantial public scrutiny can carry additional manipulation risk.
Exchanges Must Identify Insiders and Strengthen Surveillance
Designated contract markets must list only contracts that are not readily susceptible to manipulation under Core Principle 3 of the Commodity Exchange Act.
For mention markets, staff said exchanges should assess legal, professional, contractual and other obligations that constrain the person controlling the outcome. They should also consider independent verification and whether outside parties could influence that person through inducements, social engineering or public pressure.
Possible safeguards include restricted-participant lists, position limits, insider screening and surveillance for unusual trading patterns.
Advisory Stops Short of Banning Mention Markets
The advisory follows two recent CFTC enforcement actions involving event contracts. In August, the CFTC ordered Gabriel Perez to disgorge $107,539.02 and pay a $65,000 penalty after finding that he used advance access to presidential speeches obtained through his White House teleprompter job to trade mention contracts.
In July, former Rep. George Santos was ordered to disgorge $17,569.98 and pay a $17,500 penalty over trading a contract on whether he would attend the 2026 State of the Union. The CFTC found that he made material misrepresentations and omissions about his attendance while holding positions in the market.
The Sept. 22 advisory does not ban mention markets or create new binding rules. It tells exchanges that future listings need detailed, contract-specific analysis and controls capable of addressing the heightened manipulation risks.
