TheBlock
At a CFTC Innovation Advisory Committee meeting on Thursday, CME Group CEO Terrence Duffy traded public barbs with CFTC Chair Michael Selig and Kalshi Chief Operating Officer Luana Lopes Lara over the rapidly expanding prediction market sector. Duffy argued that some prediction-market contracts are vulnerable to manipulation, pointing to offshore-listed markets tied to President Donald Trump's State of the Union and Venezuelan President Nicolás Maduro's ouster. Selig cut in to call those references 'fake news' because they were listed offshore, not in the US.
Why it matters
The exchange is more than posturing. CME has staked out a visible position in the prediction market space: its derivatives venue has rolled out more than 100 million event contracts since launching them last year, and Duffy has previously called for tighter oversight of the sector. On Thursday he framed manipulation risk as a threat to Trump's stated goal of making the US the 'crypto capital of the world.' 'By listing susceptible markets to manipulation is really doing the opposite of what we're trying to effectuate,' Duffy said. The CFTC has asserted exclusive federal jurisdiction over prediction markets, including sports contracts, and has sued several states that frame the products as gambling under their gaming laws.
Market impact
The fresh friction lands as the agency readies more rule amendments for how designated contract markets list event contracts and tightens consumer protection standards for retail users. Insider trading has become a flashpoint: a US active-duty soldier was charged with using secret intelligence to bet on Polymarket about Maduro's capture, and Trump's longtime teleprompter operator allegedly used insider knowledge to place bets on Kalshi tied to the State of the Union. Both Kalshi and Polymarket have rolled out new controls. Lawmakers have introduced bills to bar sports and casino-style contracts on registered platforms, and the Senate has passed a measure banning its own members from transacting on prediction markets.
Frequently asked questions
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What did CME CEO Duffy say about prediction market manipulation?
Duffy warned that some prediction-market contracts are vulnerable to manipulation, pointing to offshore markets tied to Trump's State of the Union and Maduro's ouster. He framed the risk as a threat to Trump's 'crypto capital of the world' goal.
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Why did CFTC Chair Selig call Duffy's examples 'fake news'?
Selig interrupted Duffy to note that the contracts Duffy cited were listed offshore, not in the US, and said the references amounted to 'fake news.' The exchange highlighted a split over how broadly US regulators claim jurisdiction over the sector.
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What did Kalshi COO Lopes Lara ask Duffy at the meeting?
Luana Lopes Lara asked whether CME had ever faced market manipulation problems, prompting Duffy to retort that Kalshi's entire company was smaller than his regulatory team. She replied that Kalshi should 'learn a bit about efficiency,' and Duffy shot back about 'credible markets.'
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What insider trading cases have lawmakers cited in prediction markets?
A US active-duty soldier was charged with using secret intelligence to bet on Polymarket about Maduro's capture, and Trump's longtime teleprompter operator allegedly used insider knowledge to place bets on Kalshi tied to the State of the Union.
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What rule changes is the CFTC preparing for prediction markets?
CFTC Chair Selig said the agency expects to propose more amendments to rules governing how designated contract markets list event contracts, with stronger consumer protection standards for retail users. The CFTC has also sued several states arguing federal preemption over sports contracts.
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