CFTC Advises on Mention Markets as Worries Grow

The Commodity Futures Trading Commission, the federal body that regulates prediction market exchanges, has issued guidance on controversial “mention markets”.

Highlighting the “heightened risk of manipulation” presented in mention markets, the CFTC has set out an advisory for platforms like Kalshi to follow.

Mention markets have become popular at prediction market exchanges but consistently generate headlines, especially when they are prone to insider trading.

Though the CFTC advisory doesn’t threaten platforms with repercussions, it does remind DCMs (Designated Contract Markets) of their obligations under the current law.

Additionally, the CFTC is not banning all mention markets. However, the advisory says prediction market sites must explain why a new mention market is not open to manipulation. Under an exchange’s obligations, it must get approval from the CFTC for each new market that is opened.

What are ‘Mention Markets’?

Mention markets have become a key part of online prediction markets as they seek to differentiate themselves from traditional sportsbooks.

Traders can sell or buy contracts on what word or phrase a politician or public figure will say, oftentimes the U.S. president.

For example, Kalshi offered a mention market this week on what Donald Trump would say during his address to the United Nations.

Favorites with traders were “Iran” ($0.98 per contract), “Oil” ($0.95), and “Board of Peace” ($0.66). POTUS touched on all three subjects and the exact words were mentioned in his speech.

CFTC Head: ‘We Have a Lot of Concerns’

Singling out mention markets for particular attention, the CFTC said it was advising because their settlement “turns on the discrete conduct of a person that may be neither independently generated nor externally verifiable.”

Speaking on CNBC, CFTC chairman Michael Selig said that the regulators had “a lot of concerns with these [mention markets] contracts”, adding that it was “still seeing” activity that was “concerning”.

The timing of the staff advisory was interesting, given that Donald Trump was busy addressing the United Nations the same week.

The prediction market attracted over $470,000 in trade volume. Words like “Fentanyl” and “Zelensky” were all mentioned and resolved at $1.00 per share.

High-Profile Cases Forcing CFTC’s Hand

Mention markets wouldn’t be an issue if it weren’t for high-profile cases of insider dealing. Speechwriters or White House staff with prior knowledge of words and mentions are susceptible to using that unfair advantage to make money.

Last month, a teleprompter was fired and fined $172,000 for betting on mention markets while working at the White House. Gabriel Perez made profits of $107,000 trading on words Trump would mention during a State of the Union address.

In addition to repaying $107,000, Perez was fined $65,000. However, Kalshi had spotted the suspicious trades on its platform and informed the CFTC itself.

Sports Contracts Still Dominate State Concerns

Keeping an eye on mention markets is the least of the prediction market exchanges’ concerns right now.

The ability for exchanges to offer a range of markets is what sets them apart from online sportsbooks. However, states have begun fighting back, especially on exchanges’ moves into sports event contracts.

States with regulated sports betting are complaining that the likes of Polymarket and Kalshi are overstepping their boundaries.

This week, Missouri issued cease-and-desist letters to six predictions providers for offering “unlicensed sports betting”.

Companies cannot “repackage sports bets as event contracts” to avoid state regulations, the Missouri AG said.