The Commodity Futures Trading Commission’s (CFTC) first Innovation Advisory Committee meeting exposed sharp divisions over how to regulate the rapidly expanding prediction markets industry, with CME Group CEO Terry Duffy warning that some contracts could be vulnerable to manipulation.
The meeting on Thursday brought together more than 30 members from financial and technology companies, including CME Group, Robinhood, Nasdaq, Polymarket and Kalshi, as regulators and industry executives debated self-certification of event contracts, insider trading and consumer protection.
Duffy criticized the CFTC’s self-certification process, under which prediction market platforms can list and certify event contracts without prior agency approval.
“There’s been 2,500 self-certifications since this administration took office in January of 2025, of which none have been opposed,” Duffy said, as reported by CNBC. “There have been a lot of self-certifications around products that are in violation of core principles.”
Duffy also raised concerns about contracts tied to what public figures might say during speeches or earnings calls, known as “mention markets,” arguing that some markets were susceptible to manipulation.
“There are definitely people that are manipulating these contracts,” Duffy said. “That is not good for our industry. That is horrible for our industry.”
Robinhood CEO Vlad Tenev also urged the CFTC to closely examine mention markets, although he did not call for an outright ban.
The discussion comes as prediction markets face growing scrutiny from U.S. lawmakers and state regulators, particularly over sports-related contracts and allegations of insider trading. Federal and state authorities have also clashed over which regulators have jurisdiction over the rapidly expanding market.
Kalshi Chief Operating Officer Luana Lopes Lara defended self-certification, saying prediction markets need to be able to respond quickly to events. “We need to be able to have these markets fast for our users,” she said.
The debate later became more heated when Lopes Lara asked Duffy whether CME had faced problems with market manipulation.
“I have more people in my regulatory department than you and your entire company,” Duffy responded.
“Maybe you should learn a bit about efficiency then,” Lopes Lara said.
“Maybe you should learn about credible markets,” Duffy replied.
CFTC Chairman Michael Selig outlined a three-part regulatory roadmap for prediction markets, including changes to rules governing which event contracts the agency can prohibit, modernization of reporting requirements for fully collateralized contracts, and further amendments covering how designated contract markets list event contracts and protect consumers.
“We’ve heard the concerns of public commenters about inadequate consumer protections for retail loud and clear,” Selig said.
Selig also reiterated the CFTC’s position that it has exclusive jurisdiction over prediction markets, putting the agency at odds with state officials who argue that some contracts amount to gambling and should be governed by state gaming laws.
The CFTC has taken steps to defend prediction market platforms against state challenges. Selig has criticized New York Attorney General Letitia James, whose state sued Kalshi in July alleging it was operating as an illegal gambling operator.
“We’ve also protected federally regulated prediction markets from rogue state attorneys general like Letitia James, who seek to nullify federal law and drive these markets offshore to unregulated and foreign venues,” Selig said.
Prediction markets have also drawn scrutiny over potential insider trading. High-profile cases have involved bets linked to sensitive information about the capture of Venezuelan leader Nicolás Maduro and statements by President Donald Trump.