CFTC staff urges exchanges to detail safeguards for speech‑based prediction contracts

The Commodity Futures Trading Commission’s Division of Market Oversight issued a staff advisory on September 22 urging exchanges that list prediction contracts tied to a public figure’s words, appearance or interaction to provide detailed, contract‑specific explanations of their anti‑manipulation controls.

Why speech markets raise manipulation concerns

Contracts that settle on whether a named individual says a particular word are considered “readily susceptible to manipulation.” The advisory notes that while video evidence can confirm what was said, it cannot reveal who may have known a script in advance or whether the speaker was influenced to affect a bet.

Four key questions for exchanges

• Does the outcome‑determining person have independent legal, professional or other obligations that deter gaming?
• Could the person be pressured or induced to act in a way that benefits traders?
• Can the result be verified under substantial public scrutiny, and does the word or act have real significance?
• Are the exchange’s trading restrictions, surveillance and other controls suited to the specific manipulation risk?

Exchanges must explain how they identify individuals who control outcomes or have privileged access, and how they enforce restrictions on such participants.

Kalshi’s current speech contracts

Kalshi continued to list speech markets after the advisory, including contracts on:

• Whether former President Donald Trump would say the word “China” at least five times during a state ceremony.
• Comments by Treasury Secretary Scott Bessent in a televised interview.
• BlackBerry’s upcoming earnings call.

Trading volumes on September 23 ranged from roughly $5,000 to $126,000 across these contracts.

Kalshi’s public rules bar employees of source agencies and anyone holding material non‑public information from trading, and the exchange says it screens political figures, restricts insider trading, monitors patterns, can freeze flagged accounts, and refers cases to regulators. The advisory notes that these statements are the exchange’s own controls and have not been independently verified.

Recent enforcement highlights insider‑information risks

Two recent CFTC settlements illustrate related manipulation concerns:

• A White House teleprompter operator traded on advance knowledge of presidential speeches, earning over $100,000, without altering the speech itself.
• Former Representative George Santos traded a contract on his own State of the Union attendance while posting misleading statements, influencing market prices.

These cases underscore the importance of preventing both insider trading and outcome manipulation.

Implications for market participants

Until exchanges can demonstrate that verification methods, insider restrictions, and surveillance adequately address both the person who can influence the outcome and those who may know it first, price signals on optional words should be treated with caution.