A clash between CME Group and prediction-market operators at a Commodity Futures Trading Commission advisory committee meeting on Thursday brought the industry’s central regulatory dispute into public view: whether exchanges can safely list event-based contracts through existing self-certification rules, or whether those products require more prescriptive federal controls.
CME Group Chief Executive Terrence Duffy told the CFTC’s Innovation Advisory Committee that certain prediction-market contracts appeared susceptible to manipulation, particularly as platforms are able to self-certify a large number of new products. He cited contracts linked to comments President Donald Trump might make during a State of the Union address and to the timing of Venezuelan President Nicolás Maduro’s removal from power.
CFTC Chair Michael Selig interrupted Duffy’s remarks to say the examples he named had not been offered in the United States and instead involved offshore activity. The exchange underscored the difficulty facing the agency: debate over event contracts often blends products listed on federally regulated venues with bets offered abroad or through other structures, even though the legal standards governing them can differ sharply.
The dispute arrived as the CFTC prepares further action on event-contract oversight and defends its claimed authority against states seeking to restrict sports-related prediction markets under gambling laws.
CFTC weighs tighter event-contract standards
Selig said during the meeting that the CFTC expects to propose additional amendments governing how designated contract markets list event contracts. The agency is also considering added consumer-protection requirements, according to his remarks.
Designated contract markets are CFTC-regulated exchanges permitted to list derivatives products. Under the current framework, an exchange can self-certify that a new contract complies with the Commodity Exchange Act and CFTC regulations, rather than seeking advance approval for every listing. The CFTC can subsequently review a contract and take action if it believes the product violates the rules.
Duffy’s argument focused on the pressure that system faces when exchanges list contracts tied to political events, speeches, public decisions or other outcomes that may be influenced by people with privileged information. In these markets, a contract generally pays out based on whether a defined event occurs, allowing traders to take positions on outcomes rather than on the price of a traditional asset or commodity.
CME has itself moved into the category it is criticizing. Its derivatives venue has traded more than 100 million event contracts since launching the products last year, according to the company’s figures cited during the session. That participation gives Duffy’s comments a practical edge: the concern is less about whether regulated exchanges should offer event contracts at all than about where exchanges and regulators draw the line on contracts that can be reliably settled and fairly traded.
Prediction-market firms challenge CME’s position
The tension resurfaced when Kalshi Chief Operating Officer Luana Lopes Lara questioned whether CME had faced its own market-manipulation problems. Her exchange with Duffy turned to regulatory staffing and the credibility of established derivatives markets.
The confrontation reflects a growing divide between incumbent derivatives operators and newer prediction-market platforms. Traditional exchanges have decades of experience with surveillance, clearing and market controls, while prediction-market companies argue that their federally regulated structure provides a lawful alternative to state-regulated betting markets.
That distinction has become especially contentious for sports-related contracts. Several state officials have challenged platforms offering contracts tied to sports outcomes, arguing that the products can fall within state gambling laws. Prediction-market firms have countered that CFTC regulation preempts state restrictions when the contracts trade on registered federal venues.
Selig has backed the latter view, stating that the CFTC has “exclusive jurisdiction” over prediction markets, including sports-related contracts. The agency has sued several states while pursuing a proposed regulatory framework for event contracts, placing the federal regulator in direct conflict with state gaming authorities.
The legal battle could determine whether sports event contracts remain a specialized derivatives product or become subject to a patchwork of state-level restrictions. It also places pressure on the CFTC to show that its market-surveillance and consumer-protection rules can address concerns usually handled by gaming regulators.
Insider-information cases sharpen the debate
Lawmakers have added another layer to the argument by focusing on the possibility that people with access to confidential information can trade before an outcome becomes public.
The supplied account referenced two recent cases. In one, a U.S. active-duty soldier was accused of using secret intelligence to place a prediction-market bet connected to Maduro’s capture. In another, Trump’s longtime teleprompter operator was accused of using nonpublic knowledge to place bets tied to a State of the Union address.
Such allegations raise issues familiar to financial markets but harder to police when the underlying event is a political statement, military operation or confidential government decision. A market operator can monitor unusual trading patterns, but identifying who possesses advance knowledge of a speech, policy announcement or geopolitical event may require information outside the exchange’s reach.
Congress is considering limits that would narrow the sector’s scope. Lawmakers have introduced bills that would prohibit federally registered platforms from listing or trading prediction contracts tied to sports and casino-style games. The Senate has also passed a measure barring members from transacting on prediction markets.
Those proposals have not resolved the underlying question of which event contracts belong in CFTC-regulated markets. The advisory committee debate instead showed the agency confronting a more immediate task: setting clearer standards for listings before politically sensitive and sports-linked contracts expand faster than the rules designed to monitor them.
For deeper insight into oversight battles and market rules, explore our analysis on crypto regulation in the US today.
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