CFTC issues warning over risky prediction market ‘mention’ contracts
The warning comes weeks after the CFTC fined a former White House teleprompter operator who made more than $107,000 trading prediction contracts tied to President Trump’s speeches.
The US commodities regulator has warned that prediction market contracts tied to what a person says or does carry a heightened risk of manipulation, putting exchanges on notice as the industry faces increasing scrutiny over market integrity.
The Commodity Futures Trading Commission’s Division of Market Oversight on Tuesday said it issued an advisory to some of its regulated entities, advising that there are only “limited circumstances” in which “mention markets” — event contracts based on whether an individual will say certain words, attend or appear at an event or interact with another person — can be listed consistently with the Commodity Exchange Act.
“These contract types present a heightened risk of manipulation because their settlement turns on the discrete conduct of a person that may be neither independently generated nor externally verifiable,” the regulator said.