Prediction Markets Face Regulatory Scrutiny as CFTC Reviews Kalshi and Polymarket Risks

^{CFTC — Commodity Futures Trading Commission / © Shutterstock}

The U.S. Commodity Futures Trading Commission (CFTC) held the first meeting of its Innovation Advisory Committee focused on the regulation of prediction markets. CNBC reported on the meeting. More than 30 representatives from the financial and technology sectors took part in the discussion, including Polymarket CEO Shayne Coplan and Kalshi co-founder Luana Lopes Lara, as well as executives from Robinhood, exchange operator Nasdaq, and CME Group — the world’s largest futures exchange operator.

Debate Over Self-Certification

One of the key topics discussed was the use of the self-certification mechanism for event contracts.The mechanism allows platforms to launch new event contracts without prior approval from the CFTC, provided that they independently certify that the products comply with the regulator’s requirements.

CME Group CEO Terry Duffy said this approach could create risks for the market because new contracts may be introduced faster than regulators can assess potential issues.

According to Duffy, around 2,500 event contracts have been registered through the self-certification process since January 2025, while none of them have received formal objections from the CFTC. He cited this figure as an argument for introducing closer oversight of such products.

Kalshi co-founder Luana Lopes Lara defended self-certification, saying that prediction market platforms need the ability to quickly launch contracts tied to current events.

Mention Markets and Manipulation Risks

Participants also paid close attention to mention markets — contracts that allow users to predict which words or phrases will appear in politicians’ speeches, at public events, or in corporate earnings reports.

Robinhood CEO Vlad Tenev said prediction markets could provide value to users but urged regulators to carefully examine mention markets because of potential manipulation risks.

The meeting also addressed cases involving the possible use of non-public information in prediction markets. These included the case of a U.S. service member who was arrested after placing bets related to the potential capture of Venezuelan President Nicolás Maduro, as well as an investigation involving a teleprompter operator over prediction contracts linked to Donald Trump’s statements.

Three-Stage Regulatory Plan

CFTC Chairman Michael Selig presented a three-stage plan for further regulation of prediction markets.

The first stage involves clarifying the rules that would allow the regulator to determine which contracts may be prohibited. The second focuses on updating reporting requirements for platforms. The third would establish clearer guidelines on which new contracts platforms can offer users and strengthen consumer protection requirements.