CFTC Issues Advisory on Manipulation Risks in Prediction Markets

The CFTC's advisory signals increased scrutiny on prediction markets, potentially reshaping how these platforms operate and how traders engage with them.

• On September 22, 2026, the CFTC issued a staff advisory warning about manipulation risks in prediction markets tied to individual conduct.
• The advisory emphasizes compliance with existing regulations and requires exchanges to demonstrate safeguards against manipulation.
• Recent enforcement actions against traders exploiting nonpublic information highlight vulnerabilities in these markets.

• Prediction markets have surged, with trading volumes exceeding $25 billion in 2025, indicating a growing interest and investment in this sector.
• Past enforcement actions have revealed significant risks, including insider trading and manipulation based on personal influence, prompting regulatory responses.
• The advisory operates under existing rules while broader event-contract rulemaking remains pending, indicating a cautious approach to regulation.

The CFTC's advisory, signed by acting director Duncan Hennes, underscores the heightened risks associated with prediction markets that settle based on the actions or statements of specific individuals. These contracts, often referred to as "mention markets," are particularly vulnerable to manipulation because their outcomes can be influenced by a small number of people. Unlike contracts based on independent events, such as elections or economic indicators, mention markets rely on discrete conduct that may not be independently verifiable.

The advisory outlines several factors that exchanges must consider when evaluating the risks associated with these contracts. These include the obligations of the individual whose conduct is being measured, potential external pressures that could influence their actions, and the ability to verify outcomes through public scrutiny. The CFTC's focus on these factors reflects a broader concern about the integrity of prediction markets and the potential for abuse.

Recent enforcement actions serve as a backdrop to this advisory. For instance, Gabriel Perez, a former White House teleprompter operator, was penalized for trading on advance access to presidential speeches, resulting in a disgorgement of $107,539 and a $65,000 penalty. Similarly, former Rep. George Santos faced a $35,000 penalty for trading based on his own attendance at the State of the Union. These cases illustrate the risks inherent in mention markets and the CFTC's commitment to addressing them.

As of September 23, 2026, platforms like Kalshi continue to list certain Trump-related speech markets while excluding mention contracts from proposed margin frameworks. This indicates a shift in how these platforms are managing risk in light of the advisory. The CFTC's guidance does not create new legal obligations but requires exchanges to provide detailed manipulation-risk analyses in future filings, which could lead to more stringent compliance measures.

The advisory's implications extend beyond immediate compliance; they signal a potential shift in the landscape of prediction markets. As exchanges adapt to these new guidelines, traders may need to reassess their strategies and the types of contracts they engage with. The ongoing rulemaking process for broader event contracts remains incomplete, leaving uncertainty about future regulatory developments.

• Traders: Those actively participating in prediction markets may face changes in available contracts and trading strategies.
• Exchanges: Platforms like Kalshi must implement tighter controls and risk assessments, impacting their operational frameworks.
• Regulators: The CFTC will likely increase scrutiny and enforcement actions, affecting how prediction markets are monitored.

• Compliance adjustments: Watch for how exchanges implement new safeguards and risk assessments in response to the advisory.
• Market reactions: Monitor trading volumes and contract availability on prediction markets to gauge trader sentiment and behavior.
• Regulatory developments: Keep an eye on the progress of broader event-contract rulemaking and any additional guidance from the CFTC.