Risk of manipulation in the fast-growing prediction markets industry emerged as a central discussion point at the Commodity Futures Trading Commission‘s first Innovation Advisory Committee meeting Thursday, as regulators and industry executives clashed over whether current rules do enough to protect against bad actors.
There have been multiple high-profile manipulation incidents involving prediction markets in recent months, one of which resulted in a criminal indictment.
The meeting brought together 30 executives from exchanges, prediction market platforms, crypto firms and even sports betting operators. CME Group CEO Terry Duffy was the most outspoken critic of manipulation in prediction markets, along with some of the contracts being offered.
“There are a lot of things susceptible to manipulation,” Duffy said during the meeting. “… That is not good for our industry. That is horrible for our industry.”
Prediction market incidents so far
During the meeting, there were multiple examples of manipulation brought up. The latest one included a White House teleprompter operator trading mention markets on Kalshi involving particular words President Donald Trump would say during a speech. Gabriel Perez, a technical assistant to Trump, profited more than $100,000 from the trades.
Another incident involved U.S. Army Master Sergeant Gannon Ken Van Dyke using classified information to profit more than $400,000 on the capture of Venezuelan President Nicolás Maduro.
Former Congressmen George Santos was fined $35,000 for manipulating an event contract relating to his own attendance at the most recent State-of-the-Union address.
Sports betting has had its issues with alleged manipulation as well, though all were caught because of industry safeguards including integrity monitoring.
Selig confused on where some prediction market manipulation occured
Duffy, whose CME is powering predictions on FanDuel Predicts, brought some of those incidents to light during the meeting. He went on to explain that “we are not a bunch of carnival barkers at a circus” when making his point on manipulation.
In particular, Duffy brought up the Maduro and White House teleprompter situations. However, CFTC Chairman Michael Selig interrupted Duffy.
“Those products are not listed, they never were, these occurred offshore and it’s fake news,” he fired back. Duffy then described Selig’s “fake news” reference as a “cute” comment.
The Maduro incident was offered on Polymarket’s overseas market. However, Perez’s trades were offered in the U.S. on Kalshi’s platform, which means Selig was not entirely correct with his statement.
Coinbase CEO’s three-pronged approach
Coinbase CEO Brian Armstrong proposed a three-step framework for evaluating novel contracts:
- Does it create public harm?
- Does the market have a direct causal link to the harm?
- How subject to manipulation is it?
Armstrong addressed the manipulation aspect of a contract.
“I think it is dangerous to have something that can be decided by one person,” Armstrong explained. “But we have to be careful not to go too far with this because there could be examples where the public good outweighs the risk of it being subject to manipulation by one person.”
Armstrong also called on the CFTC to enforce manipulation, comparing it to the stock market.
The Coinbase CEO came under scrutiny himself after rattling off particular words at the end of a quarterly earnings call last October that were listed on mention markets at Kalshi and Polymarket.
Selig leading CFTC solo
Duffy mentioned that since Trump took office in January 2025, there have been 2,500 self-certifications. Of those, none have been opposed.
Duffy said “there is no doubt about it” that some of the contracts are in violation of Core Principle 3, which requires contracts that are not readily susceptible to manipulation.
There has been no push-back from the CFTC since Trump’s inauguration and Selig’s appointment as chairman in December 2025. The CFTC is supposed to be a five-person commission, with no more than three members of the same political party. Right now, it is just Selig.
