The US Commodity Futures Trading Commission (CFTC) has warned prediction market platforms that contracts based on whether individuals will say or do something could be particularly vulnerable to manipulation.
In a new advisory, the regulator highlighted what it described as the “unique dangers” of markets linked to the behaviour of individuals. The notice places platforms offering so-called “mention markets” on notice over the risks associated with those contracts.
The CFTC has not sought to prohibit this type of trading. Instead, it has indicated that platforms should meet a high bar before such markets are permitted.
The advisory focuses on the possibility that contracts centred on an individual’s behaviour could be influenced or manipulated. It therefore signals that prediction market operators will face close scrutiny when assessing whether those products can be offered.
Prediction markets allow users to trade contracts linked to the occurrence of future events. The CFTC’s latest guidance does not rule out contracts involving statements or actions by individuals, but makes clear that they raise concerns distinct from other forms of prediction-market trading.
The notice applies to platforms operating in the prediction markets sector, including those associated with markets involving public events and individual conduct. The regulator’s position is that such products should only be made available when the risks can be addressed to its satisfaction.
The advisory comes as prediction market platforms face increased attention over the scope of contracts they offer and the safeguards needed to protect their integrity. While the CFTC has stopped short of imposing a ban, its warning suggests operators may need to provide strong justification for allowing “mention markets” to proceed.
