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Prediction Market Roundup: A Comprehensive Guide to Mention Markets, Regulatory Actions, and Industry Controversies

By jili tutorial · September 27, 2026

Prediction Market Roundup: A Comprehensive Guide to Mention Markets, Regulatory Actions, and Industry Controversies

Introduction: The Rise of Prediction Markets and the “Mention Market” Problem

Prediction markets have grown from niche forecasting tools into multi-billion-dollar platforms where users bet on everything from election outcomes to sports scores. Among the most controversial types of event contracts are mention markets — contracts that allow traders to speculate on whether a prominent official will utter a specific phrase during a given public appearance. While these markets can offer insights into public discourse, they also present unique opportunities for manipulation, especially when insiders possess advance knowledge of prepared remarks.

This guide expands on recent regulatory and legal developments involving mention markets, including a pivotal CFTC advisory, insider trading allegations, state enforcement actions against major operators like Kalshi and Polymarket, and fresh accusations of wash trading. We’ll break down the context, key players, and implications for the industry.

What Are Mention Markets? Definition and Controversy

Mention markets are event contracts that pay out if a named individual — often a politician, CEO, or celebrity — says a specific word or phrase during a scheduled speech, interview, or press conference. For example, a market might ask: “Will President Biden say ‘infrastructure’ during tonight’s State of the Union address?”

Why They Attract Criticism

These characteristics have drawn the attention of the Commodity Futures Trading Commission (CFTC), which oversees designated contract markets (DCMs) in the United States.

The CFTC’s Stance on Mention Markets

The Gabriel Perez Case: A Cautionary Example

In late 2023, the CFTC banned Gabriel Perez, a former White House teleprompter operator for then-President Donald Trump, from trading on prediction markets for three years. Authorities alleged that Perez used his advance knowledge of Trump’s speeches to place a series of illegal wagers on mention markets. Because he knew exactly which phrases the president would utter, Perez could place trades with near-certainty of winning — effectively creating “risk-free” bets.

This case serves as a textbook example of why mention markets are especially vulnerable to insider trading when the underlying event depends on a single individual’s prepared remarks.

September 22 Staff Advisory: Key Takeaways

On September 22, the CFTC issued a staff advisory specifically addressing mention markets. The memo outlined several areas of concern and clarified the agency’s expectations for DCMs (Designated Contract Markets) that wish to list such contracts.

Core Problem: “Discrete Conduct” of a Single Individual

The advisory emphasized that contracts where “settlement turns on the discrete conduct” of a single person are inherently susceptible to manipulation. Unlike broad-based markets (e.g., election outcomes decided by millions of voters), mention markets can be influenced by bribing, coercing, or simply having inside knowledge of one person’s actions.

Requirements for Independence and Verifiability

The CFTC stated that to be acceptable, mention markets must be “independently generated” and “externally verifiable.” In plain English:

Compliance with Core Principle 3

Under the Commodity Exchange Act, DCMs must adhere to 23 core principles. Core Principle 3 explicitly prohibits operators from listing contracts that are “readily susceptible to manipulation.” The advisory directed DCMs interested in offering mention markets to “implement prophylactic trading rules” designed to detect and deter manipulative behavior. This may include:

The CFTC was careful to note that the advisory:

Instead, it serves as guidance to help DCMs self‑regulate and avoid potential violations.

Background: The Kalshi Lawsuit

In July, New York Attorney General Letitia James filed a groundbreaking lawsuit against Kalshi, one of the largest U.S.-based prediction market operators. The state alleged that Kalshi was operating an illegal gambling platform by offering sports‑related event contracts without a license. The case sent shockwaves through the industry, raising questions about which operator might be next.

Polymarket Sued: A Second Major Target

On Thursday, September 26, the New York Attorney General’s office added Polymarket to its list of targets. Following an investigation, Governor Kathy Hochul and AG James announced that the state is suing Polymarket for running an unlicensed gambling operation.

Key Allegations

Governor Hochul stated: “By running an unlicensed gambling operation, Polymarket has done more than just knowingly violate state law — they have put New Yorkers at risk.”

On the same day the lawsuit was announced, Polymarket moved to transfer the case from state court to the U.S. District Court for the Central District of New York (Manhattan). The company also immediately filed a countersuit against AG James and officials from the New York State Gaming Commission.

Neal Kumar, Polymarket’s chief legal officer, commented: “While the AG’s decision to copy/paste a recycled lawsuit is disappointing, we’ll fight for our users.”

Damages and Fines Sought

New York is seeking a multi‑pronged penalty package:

Interestingly, this figure is far below the $36 billion the state is seeking from Kalshi — a reflection of the state’s belief that Kalshi’s operations were more extensive, or that Polymarket’s cooperation was more forthcoming.

Wash Trading Allegations Against Kalshi

The Social Media Firestorm

A former quantitative trader ignited a debate on social media platform X (formerly Twitter) by alleging that Kalshi had been manipulating its trading volume on crypto and perpetual futures contracts over the previous month. The allegations gained traction when the Wall Street Journal published an analysis showing that more than a third of Kalshi’s perpetual trades were clustered around identical order sizes — specifically, $5,500 each.

Perpetual futures, or “perps”, are derivatives with no expiration date that allow traders to speculate on an underlying asset’s price using leverage. Over the month in question, the $5,500 orders alone totaled $5 billion in volume.

Wash Trading: What It Is and Why It Matters

Wash trading is an illegal practice in which a trader simultaneously buys and sells the same security to create artificial market activity. It can mislead other traders about genuine demand and volume, and it violates securities and commodities laws. Users on X specifically alleged that certain Ethereum (ETH) perpetual contracts on Kalshi constituted wash trading.

Kalshi’s Detailed Rebuttal

Kalshi responded with an 1,800‑word blog post titled “The Facts Behind Kalshi’s Perpetual Volume”, in which it rejected the allegations. Key points:

CFTC Investigation Status

When contacted by the Journal, the CFTC declined to confirm or deny whether it has launched an investigation into Kalshi’s trading practices. This leaves the matter in limbo, though the agency’s silence does not preclude future action.

Meanwhile: Kalshi Seeks Margin Trading Approval

Separately, on Tuesday, Kalshi submitted a filing to the CFTC requesting approval to replace full‑collateral requirements with risk‑based margin trading on certain contracts. If approved, this would allow traders to post only a fraction of the contract’s notional value as collateral — potentially increasing leverage and participation, but also raising new risk management questions.

Conclusion: What These Developments Mean for Prediction Markets

The confluence of CFTC guidance, state enforcement, and industry allegations paints a complex picture for prediction markets. While mention markets may offer novel ways to express views on public figures, their susceptibility to insider manipulation remains a serious regulatory concern. The CFTC’s advisory provides guardrails, but does not settle the legality of all mention‑type contracts.

Meanwhile, the New York lawsuits against Kalshi and Polymarket signal that state regulators are willing to challenge even well‑funded platforms. The outcomes of these cases could have far‑reaching implications for how prediction markets operate within the United States.

Finally, the wash trading allegations and Kalshi’s rebuttal demonstrate that operational transparency and robust surveillance systems are essential for maintaining trust — and avoiding the ire of both regulators and the public.

As the industry matures, all participants — from operators to traders — should brace for continued regulatory scrutiny, and ensure that their activities align with both the letter and spirit of the Commodity Exchange Act.