CFTC Probes Prediction Markets After Trump Aide Profits

The Commodity Futures Trading Commission (CFTC) has launched a probe into mention markets on prediction platforms, where users wager on specific words or phrases spoken by public figures. The investigation follows revelations that Gabriel Perez, a longtime teleprompter operator for President Donald Trump, used the platform Kalshi to profit more than $100,000 by betting on the president's word choice based on advanced knowledge of speeches.

Regulators are examining whether these markets are readily susceptible to manipulation and insider trading, which would violate self-certification rules for financial derivatives known as swaps. In response to the inquiry, Kalshi removed all sports-related mention markets, though it continues to offer wagers on political events, earnings calls, and newscasts. Kalshi's head of market operations, Arjun Sawai, defended the products, arguing they add a regulated increment to existing incentive structures.

The industry faces mounting legal pressure beyond the federal probe. A Washington state judge recently blocked several of Kalshi's markets for allegedly operating as an illegal gambling operation, following similar blocks in Michigan, Nevada, and Massachusetts. The CFTC is scheduled to discuss prediction markets, AI, and cryptocurrency during an Innovation Advisory Committee meeting on August 20.