CFTC moves to codify prediction-market rules as debate over manipulation intensifies

The Commodity Futures Trading Commission used its inaugural Innovation Advisory Committee meeting to reaffirm its regulatory authority over prediction markets. Chair Michael Selig said the agency would soon propose amendments to Parts 38 and 40, modernize reporting for fully collateralized event contracts and strengthen consumer protections for retail users.

As covered in our Aug. 14 report, prediction markets were already set to be a central focus of the committee’s first meeting. Selig laid out what CNBC described as a three-part roadmap: define terms such as “gaming” in the rules governing event-contract prohibitions, spell out public-interest criteria for commission review, then update the reporting framework for fully collateralized contracts and the listing rules that govern designated contract markets.

He argued that the absence of clearer statutory definitions leaves contracts exposed to rejection based on “arbitrary whims or political biases,” and said the CFTC’s previous approach had failed to build a comprehensive framework for these products. The commission has also already moved on related rulemaking, including a June 25 proposal on data reporting for certain fully collateralized event contracts that have been covered by staff no-action letters since 2017.

The meeting also turned into a public argument over self-certification. CNBC reported that platforms can propose, file and certify event contracts without prior CFTC approval under the Commodity Exchange Act, and Terry Duffy of CME said there had been 2,500 self-certifications since Jan. 1, 2025, none of them opposed. Duffy warned that some self-certified contracts are vulnerable to manipulation and may violate Core Principle 3, which requires markets not to list contracts readily susceptible to abuse.

He pointed to contracts tied to the ousted Venezuelan leader Nicolás Maduro, a teleprompter operator for President Donald Trump and sports event contracts that he said could be moved by a single person. Selig pushed back on the Maduro example, saying those contracts were never offered in American markets, though Duffy said Kalshi had offered Trump mention markets in the United States.

Other participants argued for a federal framework with clearer guardrails. Kalshi co-founder Luana Lopes Lara said Americans like regulation and consumer protections, and that state-by-state rules offer weaker limits on advertising to minors and self-excluded users. She also said very few states regulate those issues at all.

Brian Armstrong of Coinbase said the CFTC’s authority over the market was unambiguous, while Robinhood chief Vlad Tenev said mention markets can be vulnerable when speakers or people around them can influence whether a word is said. Jason Robins of DraftKings argued that the rules should be identical for customers who trade directly with a designated contract market and those who go through a futures commission merchant.

Christian Genetski of FanDuel said the most important task is to build consumer trust with clear rules of the road and a level playing field. Shayne Coplan of Polymarket acknowledged the market is still experimental, said the platform worked with regulators and law enforcement after insider-trading problems involving Maduro-related markets, and described Polymarket as a public, on-chain market where suspicious activity can be seen.

The commission has already been tightening other parts of the regime. On July 24, its Division of Market Oversight warned designated contract markets against broad, template-style self-certifications that bundle many possible contract variations into one filing, saying they make it harder to determine whether required analysis under Commission Regulation §40.2 has been provided.

The broader legal fight has continued outside the meeting room. On Aug. 11, the CFTC used emergency authority to order KalshiEX to keep operating in New York after the state sued the exchange, and the agency said it has also sued a number of states and filed amicus briefs to defend its jurisdiction.