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The Gambling Wire: CFTC Flags Prediction Market Manipulation Risk as Liga MX Sues Kalshi – A Comprehensive Guide

By jili tutorial · September 24, 2026

The Gambling Wire: CFTC Flags Prediction Market Manipulation Risk as Liga MX Sues Kalshi – A Comprehensive Guide

The world of prediction markets is expanding rapidly, but so is the scrutiny from regulators, lawmakers, and advocacy groups. In this guide, we break down the latest developments: the CFTC’s warning against “mention markets,” a wave of lawsuits involving Kalshi, political calls for investigations, and growing concerns that prediction markets function as gambling. We provide context, examples, and analysis to help you understand the shifting landscape.

1. CFTC Warning: “Mention Markets” Under the Microscope

What Are “Mention Markets”?

The Commodity Futures Trading Commission (CFTC) has issued a staff advisory targeting a specific type of event contract known as a mention market. These contracts allow users to bet on whether a named individual will say a specific word or phrase during a speech, appear at an event, or interact with another person. For example, a contract might ask: “Will President Biden say ‘inflation’ in his State of the Union address?” or “Will Elon Musk attend the next tech summit?”

Unlike most event contracts – which settle based on independently verifiable outcomes such as economic data releases, election results, or regulated sports events – mention markets hinge on the discrete conduct of a single person. This conduct may be difficult to verify externally, making the contract uniquely susceptible to manipulation.

Why the CFTC Sees Heightened Risk

In a staff advisory released Tuesday, the CFTC’s Division of Market Oversight stated that mention markets are “presumptively readily susceptible to manipulation.” The reasoning is straightforward: a single individual (or a small group) can control whether the event occurs. For instance, the person whose words or actions are being bet on could intentionally alter their behavior to influence the contract’s outcome – a scenario the CFTC calls a “manipulation risk” that is virtually absent in markets tied to broad, independent data.

The advisory does not ban mention markets outright. Instead, it raises the bar for exchanges wishing to list them. The CFTC encourages operators to engage with the regulator early in the contract design phase to assess and mitigate manipulation risks. Exchanges may need to implement additional controls, such as real-time monitoring, source verification, or outcome adjudication protocols.

Recent Enforcement: The Gabriel Perez Case

The advisory arrives less than a month after the CFTC ordered Gabriel Perez, a former White House teleprompter operator, to disgorge $107,539.02 in profits, pay a $65,000 civil penalty, and be banned from trading for three years. Perez made profitable trades on 39 of 43 President Trump “mention” contracts – betting on whether Trump would use certain words or phrases during speeches. The CFTC alleged that Perez used his insider knowledge of the speech drafts to gain an unfair advantage.

This case illustrates exactly the type of manipulation the CFTC fears: a person with direct influence over the event can profit from inside information. While Perez’s trades were illegal regardless of the contract type, the mention market structure made his conduct particularly easy to exploit.

Implications for Exchanges and Traders

Exchanges like Kalshi, Polymarket, and others that offer mention markets now face a higher compliance burden. They must prove that their contracts have adequate safeguards against manipulation. This could lead to fewer mention market listings, stricter disclosure requirements, or even a de facto ban if the CFTC deems the risks unmanageable. Traders should expect greater scrutiny of their positions and potential delays in contract settlement if disputes arise.

Liga MX Trademark Lawsuit

The Mexican Football Federation (FMF) – which operates the Liga MX league – has sued Kalshi in federal court in New York, alleging trademark infringement. The Federation claims Kalshi improperly used the “Liga MX” word mark and the names of its member clubs in prediction markets without authorization. According to the complaint, Kalshi continued using these marks despite receiving multiple cease-and-desist demands. While Kalshi removed certain logos, the FMF argues that plain-text identification still infringes on its intellectual property rights.

Kalshi has defended its use, stating that its references were “limited to plain-text identification” within CFTC-regulated markets and that it did not violate any intellectual property laws. The case highlights the tension between free use of descriptive names for market contracts and trademark holders’ rights to control commercial use of their brands.

Wisconsin Federal Court: Kalshi Faces IGRA Claims

Kalshi is also fighting a legal battle in Wisconsin, where the Ho-Chunk Nation has brought claims under the Indian Gaming Regulatory Act (IGRA) . The tribe argues that Kalshi’s prediction markets involving sports events constitute gambling that infringes on tribal gaming rights. The district court allowed the IGRA claims to proceed, rejecting Kalshi’s argument that the Commodity Exchange Act (CEA) or the Unlawful Internet Gambling Enforcement Act (UIGEA) displaces tribal authority over the disputed activity.

Kalshi has now asked the Seventh Circuit for permission to appeal the decision. The court certified two questions for interlocutory appeal, which Kalshi argues are issues of first impression: How do IGRA, the CEA, and UIGEA interact? Can a CFTC-regulated exchange be sued under federal gambling laws? A ruling in favor of the tribe could set a precedent that exposes prediction markets to additional legal challenges from Native American tribes across the country.

Tennessee Uses Ninth Circuit Ruling as Supplemental Authority

Meanwhile, in its separate litigation with Tennessee, Kalshi faces another setback. The state cited a recent Ninth Circuit decision that upheld claims by two California tribes against Kalshi. Tennessee argues that the ruling undermines Kalshi’s position that UIGEA’s exemption for CFTC-regulated transactions prevents other federal gambling laws from applying. If the Sixth Circuit agrees, Kalshi could be forced to either modify its contracts or exit certain state markets entirely.

Impact on the Prediction Market Industry

These legal battles collectively threaten Kalshi’s business model. If courts rule that prediction markets are not protected by CFTC regulation, or that they infringe on tribal sovereignty, other operators could face similar lawsuits. The outcome will shape the regulatory landscape for all event contracts in the United States.

3. Political Scrutiny: Senator Curtis and Trump Jr.’s Prediction Market Ties

Senator Calls for Investigation

Sen. John Curtis (R-Utah) has asked the Senate Judiciary Committee to investigate business dealings involving members of the presidential family. In a letter, he specifically called for subpoenas for Donald Trump Jr. and Hunter Biden. Regarding Trump Jr., Curtis pointed to his investments in cryptocurrency ventures, international real estate, defense contracts, and – notably – his “significant financial and advisory ties to prediction market platforms.”

Trump Jr. holds advisory roles at both Kalshi and Polymarket and has personal investments in the sector. Curtis argued that these ties create a conflict of interest because the prediction market industry depends on favorable regulatory decisions from the CFTC, an independent agency whose commissioners are appointed by the president. The senator suggested that Trump Jr. could influence policy to benefit his own financial interests.

Curtis’s Own Legislative Efforts

Sen. Curtis has introduced or co-sponsored legislation to ban or limit certain prediction markets. He has been a vocal critic of allowing election betting and other high-risk contracts. The investigation request adds a political dimension to the regulatory debate, as lawmakers weigh the potential for insider influence and corruption.

Broader Implications

If the investigation proceeds, it could lead to hearings, new ethics rules, or even legislative restrictions on prediction market operations. The involvement of a former president’s son – who holds no official government position – raises questions about the reach of financial influence in regulatory agencies.

4. NCPG Warns: Prediction Markets Are “Functionally Gambling”

The National Council on Problem Gambling’s Stance

The National Council on Problem Gambling (NCPG) has issued a strongly worded statement about prediction markets. Derek Longmeier, NCPG Board President, said the organization remains neutral on whether prediction markets should be legal. However, he stated unequivocally that “they are functionally gambling” regardless of their current legal classification.

The NCPG argues that consumers face many of the same risks as with traditional gambling: financial loss, addiction, and lack of consumer protections. Longmeier added, “The harm is not theoretical, and we cannot wait to act.” The statement calls for minimum standards for all “functionally gambling” products, including responsible-engagement tools, self-exclusion programs, age verification, risk disclosures, and direct access to help resources.

The Funding Model Controversy

The NCPG’s statement also addressed its own funding model. The organization has faced criticism because many of its members and donors are gambling operators. Longmeier acknowledged this, saying “donor engagement does not mean endorsement.” The NCPG insists that its positions are independent, but skeptics question whether reliance on industry money compromises its advocacy.

Youth Exposure and the Need for Protections

The NCPG highlighted that prediction platforms are increasingly reaching younger Americans, many of whom may not realize they are engaging in gambling. The organization warned that protections have not kept pace with the rapid growth of the sector. Without clear rules and guardrails, vulnerable individuals could suffer significant harm before regulators catch up.

5. Industry Responses and Reform Efforts

In a separate development, FanDuel banned a customer named Esteban Ruiz-Haynes after he was featured in a CBS News investigation. The report examined sportsbook marketing and responsible gambling practices, and Ruiz-Haynes discussed his gambling behavior and mounting losses while interacting with FanDuel. The company subsequently banned him, but the timing raised questions about retaliation.

FanDuel told CBS News that it has sophisticated protections to spot problem gamblers and disputed the characterization that it does not aggressively monitor and address problem gambling. The incident highlights the tension between operators’ duty to protect customers and their desire to avoid negative publicity.

Blumenthal and Tonko Join Gambling Reform Campaign

Sen. Richard Blumenthal (D-Conn.) and Rep. Paul Tonko (D-N.Y.) participated Wednesday in the launch of “Truth and Integrity: The Movement for Gambling Reform” in Washington, D.C. The initiative, organized by the Public Health Advocacy Institute and Families and Friends of Gamblers, calls for congressional hearings, minimum federal safety standards, and stronger state regulation.

The campaign will also focus on the gambling industry’s financial relationships with professional sports, college athletics, prediction markets, and technology companies. Organizers argue that these ties create conflicts of interest and undermine public health protections.

Kevin Costner’s Private Retreat

Actor Kevin Costner has stepped into the fray. He told InGame that he offered his Dunbar Ranch in Colorado as a neutral location for a private retreat where gambling, tribal, and prediction-market executives could discuss the growing divide over sports event contracts. According to Costner, about 70% of invitees responded positively. The retreat aims to foster dialogue and possibly find common ground, though critics may view it as an attempt to co-opt opposition.

Underdog Partners with Birches Health

Underdog – a sports betting and prediction market operator – has partnered with Birches Health to expand its responsible-play resources and consumer-protection measures. The agreement integrates Birches Health’s specialized treatment and support into Underdog’s player-protection framework. This move comes as Underdog expands into the prediction market space, where some operators do not offer comparable responsible gambling tools. It represents an industry attempt to voluntarily address harm before regulators mandate it.

6. Broader Context: The Unregulated EU Gambling Market

New research commissioned by the Campaign for Fairer Gambling (CFG) and produced by Gaming Compliance International estimates that unregulated operators generated €91.6 billion ($104.5 billion) in online gambling gross gaming revenue from consumers across the European Union in 2025. That represents 72% of the total €128 billion EU online gambling market. The report estimates that unregulated gambling has increased 74% in just two years.

This data underscores the global scale of unregulated gambling – and by extension, the challenge faced by regulators in the U.S. as they try to bring prediction markets under control. If unlicensed operators can thrive in the EU, a similar black market could emerge in the U.S. if regulation becomes too restrictive.

Conclusion

The convergence of CFTC advisories, multiple lawsuits, political investigations, and advocacy campaigns signals a watershed moment for prediction markets. The industry is no longer flying under the radar. Whether you are a trader, an operator, a regulator, or a concerned citizen, these developments will shape the future of event contracts for years to come. The key questions remain: Are prediction markets a form of gambling? Who should regulate them? And how can consumers be protected without stifling innovation? The answers will unfold in courtrooms, congressional hearings, and regulatory filings.