The Commodity Futures Trading Commission’s market-oversight division issued a staff advisory on September 22 warning that contracts tied to a public figure’s words or actions carry heightened manipulation risk and demanding clearer explanations of exchange safeguards.
CFTC’s concerns about speech-based contracts
The advisory notes that outcomes dependent on a named individual’s statements are "presumptively readily susceptible to manipulation," a standard drawn from existing obligations for regulated platforms to list only contracts that are not easily exploitable. While the guidance does not create binding rules, it signals that exchanges must provide contract-specific details on how they mitigate the dual-front risk of a speaker being pressured and insiders exploiting privileged knowledge.
The staff memo lists four non-exhaustive questions for exchanges:
- Does the person determining the outcome face independent legal, professional, or other duties that discourage gaming?
- Could any party exert pressure or inducement on that individual?
- Is the result verifiable under broad public scrutiny?
- Are the exchange’s trading restrictions, surveillance and other controls appropriate for the specific risk profile?
Public video or transcripts can confirm what was said, but they do not address whether the speaker was influenced or whether someone with prior access traded on that information.
Kalshi’s current approach and recent market examples
Kalshi, the only U.S.-registered exchange listed in the advisory, continued to offer speech markets after the notice. Recent checks showed modest trading volumes on three contracts: a bet on former President Donald Trump’s use of the word “China” during a state visit (≈ $125,776), a market on Treasury Secretary Scott Bessent’s televised interview (≈ $5,333), and a contract tied to BlackBerry’s earnings call (≈ $23,973).
The Trump contract, for instance, bases settlement on a live video of the September 24 ceremony, resorting to official transcripts if the video is ambiguous. The listing explicitly bars employees of news agencies and anyone holding material non-public information from participating. Kalshi says it screens certain political figures and relevant government staff, freezes accounts that appear suspicious, and refers cases to regulators. However, the advisory points out that these statements have not been independently verified for effectiveness.
Prior settlements underline insider-trading risks
Two recent CFTC settlements illustrate the type of abuse the agency aims to curb. In August, the commission found that a White House teleprompter operator traded on contracts that referenced presidential speeches before they were delivered, netting roughly $107,500. The trader did not alter the speech but profited from early access to the script.
A separate July case involved former Congressman George Santos, who placed a bet on his own attendance at the State of the Union while publicly misstating his intentions. Prices moved in his favor, highlighting how a participant can influence both the event and market perception.
Both cases involved contracts that were not outright prohibited but demonstrated how insider knowledge can distort market outcomes.
Why it matters
The CFTC’s advisory underscores a growing regulatory focus on niche prediction markets where outcomes hinge on human behavior rather than purely economic data. As platforms like Kalshi expand into political and corporate speech contracts, the potential for insider exploitation and external pressure grows. Clear, enforceable safeguards will be essential to preserve market integrity and protect investors from manipulation that is harder to detect than traditional price-based fraud. The agency’s push for detailed disclosures may prompt exchanges to strengthen surveillance, refine participant eligibility, and develop more robust verification mechanisms, setting a precedent for how emerging derivative products are overseen in the United States.
