The Commodity Futures Trading Commission’s Division of Market Oversight has issued new guidance warning that prediction contracts tied to what a specific person says, attends or does carry heightened manipulation risks. The September 22 advisory says so-called “mention markets” can be unusually vulnerable because settlement may depend on conduct controlled, anticipated or influenced by a small number of people. The guidance applies to designated contract markets and does not itself create new binding requirements.
According to the official CFTC staff advisory, exchanges remain bound by Core Principle 3 of the Commodity Exchange Act, which requires listed contracts not to be readily susceptible to manipulation. DMO staff says mention markets may require a heightened showing before listing because insiders can possess scripts, prepared remarks, guest lists or other material nonpublic information, while outsiders may attempt to induce the settlement-triggering conduct.
CFTC Sets a Higher Bar for Contract Design
The guidance identifies four major considerations: independent obligations constraining the person who controls the outcome, susceptibility to outside pressure, independent verification and public scrutiny, and the strength of trading rules and surveillance. A well-designed contract can still satisfy Core Principle 3, but exchanges are expected to demonstrate that their controls meaningfully address the specific manipulation path created by the contract.
Verification is particularly important because some event contracts depend on conduct that is difficult to establish independently. Similar concerns have already surfaced around prediction-market settlement and event-verification risk when ambiguous underlying events create disproportionate consequences for traders. DMO says contracts based on private settings, non-public individuals or actions lacking substantive relevance are more likely to escape meaningful scrutiny.
The advisory also recommends tools including restricted-participant lists, position limits, enhanced surveillance, employment-status checks and monitoring for unusual trading shortly before information becomes public. That emphasis places product design and participant surveillance alongside conventional settlement rules as core market-integrity controls. Prediction platforms have already been strengthening other areas of oversight, including identity and access controls on Kalshi.
Enforcement Cases Show the Underlying Risk
Recent CFTC enforcement provides separate examples of why those concerns matter. On August 28, the regulator ordered former White House teleprompter operator Gabriel Perez to disgorge $107,539.02 and pay a $65,000 penalty after finding that he used advance access to presidential speeches to trade mention contracts. Perez also received a three-year CFTC trading ban after profiting from information obtained through his government employment.
The CFTC similarly settled with former Representative George Santos on July 31 over trading tied to whether he would attend the State of the Union. Santos was ordered to disgorge $17,569.98, pay a $17,500 penalty and accept a three-year trading ban. Kalshi later imposed a separate lifetime platform ban, illustrating how exchange-level controls can operate alongside federal enforcement. Related platform actions against politically connected traders have also included Kalshi’s suspension of Laurie Buckhout over election-linked bets.
The advisory arrives amid a broader regulatory debate over event markets, including disputes over federal and state authority such as New York’s prediction-market cases against Coinbase and Gemini. Separately, Kalshi Klear said its September 22 proposal for margin trading would exclude sports, culture and mention markets. That same-day exclusion is consistent with a more cautious treatment of these products, but the available evidence does not establish that Kalshi changed its proposal in direct response to Letter 26-27.
The next milestone will be how DCMs revise new Part 40 submissions and existing surveillance frameworks. The CFTC has not banned mention markets; it has effectively raised the evidentiary and control burden for demonstrating that a particular contract can operate without being readily susceptible to manipulation.
