The U.S. Commodity Futures Trading Commission (CFTC) has warned regulated exchanges about the manipulation risks of prediction-market contracts based on what a specific person says or does, while Kalshi is separately seeking approval to offer margin trading on eligible event contracts.
Source: cftc.gov
The CFTC said so-called “mention markets” require particular care because their outcome can depend on a person’s words, appearance or interaction with another person.
At the same time, Kalshi’s clearinghouse has asked the regulator to allow institutional traders to use borrowed funds on certain event contracts. The CFTC’s advisory, dated September 22, covers event contracts in which traders take yes-or-no positions on whether a particular person will use a word or phrase, attend an event, appear somewhere or interact with another individual.
The regulator said these contracts can carry a higher manipulation risk because settlement depends on the conduct of a specific person. Unlike a contract linked to an economic statistic or sports result, the outcome may depend on an action that is difficult to independently verify or potentially capable of being influenced.
Regulatory clarity drives sound markets. Pleased to see staff provide guidance on the potential risks and unique considerations associated with the listing of mention markets on @CFTC regulated exchanges and remind DCMs of their obligation to list only contracts not readily… https://t.co/KwRpmLQ43Y
— Mike Selig (@ChairmanSelig) September 22, 2026
The advisory does not ban mention markets. Instead, CFTC staff outlined circumstances under which such contracts could still be listed and provided factors that exchanges should consider when designing and submitting them.
Among the issues exchanges should examine are whether the person involved has legal, professional, contractual or other obligations that could affect the outcome; whether outside pressure could influence the person’s conduct; whether the relevant words or actions can be independently verified; and whether the exchange has adequate surveillance systems to identify manipulation.
The CFTC’s latest position follows enforcement actions involving prediction-market contracts. On August 28, the agency ordered Gabriel Perez to pay $172,539.02 over insider trading involving Kalshi mention markets. Perez, a former White House teleprompter operator, had advance access to prepared remarks by President Donald Trump and used that information to trade related contracts between December 2025 and February 2026.
The order included $107,539.02 in disgorgement, a $65,000 civil penalty and a three-year trading ban on CFTC-registered platforms. The CFTC also credited KalshiEX with assisting the investigation.
Another case involved former Representative George Santos, who agreed in July to pay $35,069.98 and accept a three-year CFTC trading ban over alleged manipulative trading in a Kalshi contract concerning attendance at the 2026 State of the Union. Santos did not admit or deny the findings.
Source: kalshi.com
Against this regulatory backdrop, Kalshi’s clearinghouse, Kalshi Klear, has filed a separate request under Regulation 40.5 seeking permission to offer margin trading on certain event contracts. The proposed service would be aimed at eligible traders who meet specified capital requirements. Margin would allow them to trade positions larger than their initial deposit.
Kalshi has said the proposed margin system would not apply to sports contracts. The company has also confirmed that culture and mention markets would be excluded.
The filing is aimed partly at attracting institutional liquidity. Kalshi already offers leverage through its perpetual futures products, including crypto-linked contracts. The CFTC approved its bitcoin perpetual futures product, BTCPERP, in May, making it the first fully regulated perpetual futures product of its kind in the US, according to the source material.
The two developments show the different regulatory questions now facing prediction markets. On one side, the CFTC is examining whether certain event contracts can be structured and monitored sufficiently to limit manipulation. On the other, Kalshi is seeking to expand the tools available to professional traders.
The CFTC advisory is staff guidance rather than a formal Commission rule and does not automatically require existing mention markets to be delisted. Instead, new or redesigned contracts will face closer scrutiny over settlement methods, potential manipulation and surveillance.
For Kalshi, the next steps will depend on the CFTC’s response to its margin request as well as how the platform adapts to the regulator’s guidance on mention markets.
Stay informed with the latest trends in Web3, blockchain innovation, and cybersecurity updates at 3verseTV
You need to login in order to Like
Leave a comment