U.S. regulator warns about cheating risks in 'mention markets' on prediction platforms

Popular betting on what an individual might say or do, known as "mention markets," pose some special dangers in the eyes of the U.S. regulator overseeing prediction market firms such as Kalshi and Polymarket, according to an advisory issued on Tuesday that may narrow the window on event contracts that would easily clear the agency's supervisory hurdles.

This category of wagering isn't like other markets featuring "independently generated, externally verifiable outcomes that are outside the control of any single person," said the Commodity Futures Trading Commission's staff advisory. Instead, the agency noted, the outcome pivots on "the discrete conduct of a named person, and that conduct may be neither independently generated nor externally verifiable."

Basically, the individual or people around the person could shift the outcome based on their own knowledge of the betting. The CFTC's Division of Market Oversight that watches this sector may see these markets as "presumptively readily susceptible to manipulation," according to the advisory. To that end, the CFTC reminds prediction platform operators that they're only allowed to trade "derivative contracts that are not readily susceptible to manipulation."