According to an NPR report citing two sources with direct knowledge of the investigation, the Commodity Futures Trading Commission is investigating prediction-market contracts on whether certain words or phrases will be uttered. The so-called “mention markets” are being scrutinized over speculation that their outcomes may be too easy to manipulate.
Kalshi, however, took down its markets on sports mentions on the platform “until further notice”, NPR reported. Kalshi and the CFTC did not comment to NPR, and at the time, there was no public enforcement action or investigation into the contracts by the CFTC.
Mention markets allow traders to speculate on whether a person will say a specific word or phrase, such as “MVP” for sports contracts and “ankle” and “redshirt”. Although sports mention contracts are suspended, other mention contracts are still available, which include whether President Donald Trump will mention a word or phrase and whether a politician will appear.
According to NPR, Polymarket also has mention markets on its offshore version, but they do not operate on the smaller CFTC-regulated U.S. version of the site.
Commodity Exchange Act designated contract markets must not only offer contracts that are not readily susceptible to manipulation, but also systems to prevent manipulation, price distortion, and settlement disruption. The CFTC’s general rulemaking proceeding has considered how these provisions apply to prediction markets.
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Word contracts may raise another problem, because a broadcaster, executive, or politician acting alone could determine the outcome of such a contract merely by saying a certain word. This concern is less likely to arise for event contracts, where the outcome depends on a complicated array of facts that no one person can control.
The case is reminiscent of earlier possible prediction market violations. Kalshi said the trading was suspiciously signaled by Trump’s words to the CFTC. According to Reuters, more than $90,000 worth of profit had been frozen at that point in this case. The alleged trader, Gabriel Perez, had worked as Trump’s teleprompter operator, and was said to have been briefed in advance.
Separately, CFTC enforcement actions regarding the event contracts continued to focus on nonpublic information, manipulation, and market integrity.
It is uncertain whether and in what form sports mention markets will be able to return to Kalshi, whether they could exist under more restrictive regulations or different structures and eligibility, or whether contracts will be found to be prohibitively risky.
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All mention-based contracts are currently paused, with no indication of when they will resume, but other mention markets remain available. A statement from the CFTC or changes to the certification of future contracts would show if the regulators want to regulate these word-based prediction markets in a more sweeping fashion. No timeline has been decided.
