Prediction markets have recently gained notoriety for their controversial mention markets, which allow users to profit if a speaker uses specific words or phrases during key appearances. This scrutiny intensified last month following reports of an investigation into Gabe Perez, a longtime teleprompter operator at the White House.
Perez, who was placed on unpaid leave after allegations arose that he made over a dozen trades on speeches by US President Donald Trump, reportedly netted approximately $100,000 from trades on the platform Kalshi. As a result, the US Commodity Futures Trading Commission (CFTC) has initiated a review of these mention markets, according to a report by NPR on August 13.
White House Press Secretary Karoline Leavitt, who recently announced her resignation, criticized Perez as a “disgrace” over the allegations. Kalshi's surveillance team flagged Perez's trades, leading to the freezing of about $90,000 in potential winnings before the platform informed the CFTC of the situation. Following this, Trump ordered Perez to be placed on leave, prompting the federal regulator's review of trading in derivatives.
Throughout 2023, operators within prediction markets increasingly introduced mention markets tied to major sports broadcasts. For example, during the FIFA World Cup, millions of dollars were traded on these contracts. However, Kalshi has since removed its sports-related mention markets.
In another development, the CFTC issued new guidance on August 12, seeking to address the deficiencies related to the self-certification of programs offering incentives within prediction markets. Through this guidance, operators are reminded of their regulatory responsibilities when submitting self-certification paperwork for market making, incentive, liquidity, and trading programs. The agency highlighted issues with an increasing number of these self-certifications lacking procedural or substantive integrity. The CFTC's objective is to foster transparency and ensure that incentive programs, which can significantly impact trading behaviors and associated fee structures, adhere to regulatory standards.
Designated Contract Markets (DCMs), which fall under the Commodity Exchange Act, are authorized to list derivatives but must maintain comparable fee structures across different traders. The CFTC guidance also warns against preferential treatment or the provision of VIP access to products without proper market disclosures.
Media attention on sportsbook VIP programs has surged recently. In the lead-up to the Major League Baseball All-Star Game, reports revealed that Philadelphia Phillies player Bryce Harper filmed a personalized video thanking a VIP bettor named Terry Thompson. Thompson subsequently filed a lawsuit against FanDuel, alleging that the platform lured him back with various VIP benefits, contributing to his gambling addiction and subsequent losses exceeding $1.5 million. In response, Senator Richard Blumenthal and two House members wrote to the MLB Players Association urging a ban on advertising linked to VIP betting programs.
Additionally, JPMorgan Chase & Co. reportedly cut its banking ties with Polymarket last year, citing regulatory concerns. Polymarket, which aims for a valuation of around $20 billion, had previously reached a settlement with the CFTC in 2022 for operating without proper registration. Last September, the CFTC greenlit Polymarket’s plans to relaunch its platform for US traders, distinct from the offering available to international users.
While JPMorgan declined to comment, Polymarket stated that it maintains an ongoing relationship with the bank concerning customer fund flows. The presence of a dual-platform structure has attracted criticism, especially since DCMs are not permitted to list event contracts related to issues like war or terrorism under CFTC Rule 40.11. Recently, Polymarket’s offshore platform continued to list a contract concerning the trial of Luigi Mangione, who admitted to shooting former UnitedHealthcare CEO Brian Thompson in 2024, with a possible trial date set for 2027. The odds of this trial significantly shifted prior to Mangione's recent court appearance after negotiations took place between his attorneys and prosecutors.
