Recent developments in prediction markets have heightened scrutiny surrounding a particular type of event contract known as "mention markets." These markets allow users to profit from specific words or phrases spoken during high-profile speeches. The controversy intensified last month following reports of investigations into Gabe Perez, an operator of White House teleprompters. Perez was allegedly involved in over a dozen trades based on speeches given by former President Donald Trump, reportedly earning around $100,000 through trades on Kalshi. In response to these allegations, Perez was suspended on unpaid leave, and the U.S. Commodity Futures Trading Commission (CFTC) commenced a review of mention markets, as reported by NPR on August 13.
White House Press Secretary Karoline Leavitt labeled Perez's actions a "disgrace" as the surveillance team at Kalshi flagged his trades, leading to the freezing of about $90,000 in potential winnings. After the alert from Kalshi, Perez was placed on leave by Trump, prompting further investigation by the CFTC regarding derivatives trading.
This year has seen prediction market operators increasingly offer mention markets, particularly for significant sports events. During the FIFA World Cup, these markets posted millions in trading volume. As a precautionary measure, Kalshi has since removed all sports-related mention markets from its platform.
There has been no official comment from either the CFTC or Kalshi regarding the ongoing review.
In another development, the CFTC has issued new guidance concerning the self-certification process for incentive programs in prediction markets. Announced on August 12, this guidance aims to address various deficiencies seen in self-certifications for market-making and trading programs. The CFTC noted an alarming increase in submissions rife with procedural and substantive issues, stressing the importance of regulatory compliance to ensure transparency in trading practices.
Designated Contract Markets (DCMs), which are licensed to offer derivative markets under the Commodity Exchange Act, must ensure their fee structures remain equitable and aligned with program goals, as indicated by the CFTC. The guidance serves as a reminder that DCMs should avoid providing preferential treatment, specifically regarding VIP access to products without transparent market disclosures.
Media attention has also focused on sportsbook VIP programs recently. Notably, Philadelphia Phillies player Bryce Harper created waves by filming a personalized video for a VIP bettor named Terry Thompson, expressing gratitude for his support. Following this, Thompson filed a lawsuit against FanDuel, claiming that the sportsbook lured him back through enticing VIP perks, contributing to his gambling addiction and subsequent losses of approximately $1.5 million. In light of this, Senator Richard Blumenthal and two U.S. Representatives have urged the MLB Players Association to ban advertising linked to VIP betting programs.
In a related story, a report indicates that JPMorgan Chase & Co. severed ties with Polymarket due to regulatory issues, as revealed this week. Polymarket, which aims for a $20 billion valuation, had previously reached a settlement with the CFTC in 2022 for operating an unregistered platform. In September, the CFTC approved Polymarket's plan for a compliant relaunch in the U.S., while it continues to operate a separate platform for international users.
Despite the controversy, Polymarket is actively seeking a new banking partner and maintains that it has an “active relationship” with JPMorgan across various entities, including customer funds management.
The offshore structure of Polymarket has raised concerns, particularly regarding CFTC Rule 40.11, which prohibits DCMs from offering event contracts tied to war, assassination, or terrorism. Yet, the offshore platform recently featured a contract on whether Luigi Mangione would go to trial in 2027. Mangione, who admitted guilt in a federal court for shooting former UnitedHealthcare CEO Brian Thompson in 2024, is set for sentencing in December. Notably, odds for a 2027 trial dropped significantly just before Mangione’s recent court appearance, which included last-minute negotiations between his defense team and prosecutors.
