CFTC Prediction Market Roadmap Draws Scrutiny Over Manipulation

Commodity Futures Trading Commission (CFTC) Chair Michael Selig outlined a new regulatory roadmap for prediction markets Thursday, as industry executives debated manipulation risks, consumer protections and the limits of self-certified event contracts.

During the inaugural meeting of the CFTC’s Innovation Advisory Committee, Selig promised new “rules of the road” covering consumer protection, product governance and market design while again asserting the agency’s authority over federally regulated event contracts.

But the prediction market discussion also exposed disagreements over the limits of that approach. CME Group Chairman and CEO Terry Duffy challenged the CFTC’s approach to self-certified contracts and clashed directly with Selig and Kalshi co-founder Luana Lopes Lara.

CFTC Lays Out a Regulatory Roadmap

Selig outlined a three-part regulatory roadmap for prediction markets, beginning with the CFTC’s recently proposed amendments to Rule 40.11.

The proposal would clarify key terms and public-interest criteria governing contracts involving categories such as gaming, war, terrorism and assassination. The agency has also proposed updated reporting requirements for fully collateralized event contracts.

Selig said the CFTC will also soon propose amendments to Parts 38 and 40 governing designated contract markets. That includes new consumer-protection requirements and standards for product governance, market design and incentive programs.

We’ve heard the concerns of the public loud and clear regarding the inadequacy of our existing consumer protection requirements for retail,” Selig said.

He also reiterated the CFTC’s position in its ongoing legal battles with states seeking to apply gambling laws to federally regulated prediction markets. Selig said that the agency would continue to “defend our exclusive jurisdiction in court.”

Kalshi, Coinbase Defend Federal Framework

Lopes Lara argued that federally regulated prediction markets can provide stronger consumer protections than a state-by-state system.

I’ve never heard a single argument on why state by state has better consumer protection than a federal framework,” she said.

She also defended the broader value of prediction markets beyond trading. Lopes Lara argued that their prices can provide information about future events and enable exchanges to create markets for risks that the derivatives industry has traditionally ignored.

Coinbase CEO Brian Armstrong offered a similarly strong defense of federal oversight.

The federal law is unambiguous here that the CFTC has exclusive jurisdiction,” Armstrong said.

Armstrong described prediction markets as a “genuine public good.” Robinhood CEO Vlad Tenev also backed the federal framework. Tenev said the company believes “the CFTC is the correct regulator” for prediction markets.

Duffy Challenges CFTC Oversight

The strongest pushback came from Duffy. He questioned the CFTC’s self-certification framework and whether it provides sufficient oversight of the thousands of new contracts reaching the market.

Duffy argued that some contracts currently being offered are readily susceptible to manipulation. He cited mention markets, certain sports contracts and markets involving military or political events. The criticism builds on a position Duffy has taken previously. During CME’s second-quarter earnings call in July, he argued that some sportsbook-style prediction markets amount to gambling.

This is not good for our industry. It’s horrible for our industry,” Duffy said. “We are not a bunch of carnival barkers at a circus.”

Duffy said approximately 2,500 event contracts have been self-certified since the current administration took office in January 2025. However, the CFTC has not opposed a single one.

Duffy’s comments led to a disagreement with Selig.

After Duffy cited alleged insider trading surrounding a contract involving former Venezuelan President Nicolás Maduro and trades by President Donald Trump’s former teleprompter operator, Selig pushed back.

Those products are not listed in the United States. They never were. Those were offshore and that’s fake news,” Selig said.

Duffy challenged the assertion. He acknowledged that the Maduro trades occurred on Polymarket’s offshore platform but noted that sports contracts of the type he was discussing are offered by CFTC-regulated exchanges. The Trump teleprompter trades also occurred on Kalshi. The company’s surveillance team identified the activity and referred it to the CFTC.

CME, Kalshi Clash Over ‘Credible Markets’

After Duffy criticized Kalshi and questioned why some of its products could reach the market through self-certification while similar CME proposals faced additional regulatory review, Lopes Lara fired back.

“Has CME never had any issues with any market manipulation, any issues ever in its history?” she asked.

“If you’d like to have a debate, I’m happy to have a debate with you,” Duffy responded, before adding: “I have more people in my regulatory department than you do in your entire company.”

“Maybe you should learn a bit about efficiency then,” Lopes Lara said.

“Maybe you should learn about credible markets,” Duffy responded, prompting committee chair Walt Lukken to ask the participants to keep the discussion productive.

Lopes Lara subsequently argued that manipulation is not unique to prediction markets.

“Every market has risk, and every nascent market will have risks as well,” she said. She argued that the purpose of regulation is to identify and address those risks rather than prevent emerging markets from developing.

Duffy was not alone in criticizing certain event contracts. Tenev said certain mention markets are “very prone to manipulation,” and that there is a customer protection issue. Meanwhile, DRW founder Don Wilson cited the George Santos State of the Union contract as an example of a market that arguably should never have been listed.

“There are clearly some markets that just don’t meet that bar that have been listed,” Wilson said.

Polymarket CEO Shayne Coplan defended the surveillance capabilities of blockchain-based prediction markets. He disputed the idea that activity on Polymarket’s international platform is anonymous.

Industry Calls for Consistent Consumer Protections

Despite disagreement over individual products, several executives converged around the need for clearer and more consistent retail protections.

Fanatics Betting & Gaming CEO Matt King called for minimum consumer-protection standards across operators. King warned that failures could ultimately produce a backlash against the entire industry. FanDuel President Christian Genetski similarly said establishing consumer trust should be the sector’s immediate priority.

DraftKings CEO Jason Robins agreed that retail protections should be consistent, saying rules for customers trading directly through a DCM and those accessing markets through a futures commission merchant should be “identical.”

Robins also urged participants to avoid attacking competitors over business models or decisions they disagree with, saying that “doesn’t advance the discussion.”