CFTC scrutiny and the regulatory battle over prediction markets

The CFTC’s new stance on mention markets

The CFTC Division of Market Oversight issued Staff Advisory 26-27 on September 22, 2026, and labeled "mention markets" as "presumptively readily susceptible to manipulation." These contracts settle on the discrete conduct of a named individual, such as whether a person uses specific words in a public forum or attends an event. This guidance follows an August 28, 2026, enforcement action where the CFTC ordered Gabriel Perez, a former teleprompter operator, to pay $172,539.02 in total sanctions. Perez used advance access to presidential remarks to trade mention market contracts on Kalshi between December 2025 and February 2026. This action follows an August 2026 NPR report regarding a non-public CFTC review of mention market contracts. Designated contract markets must now provide a "heightened showing" to list such products. To rebut the presumption of manipulation, platforms must satisfy four specific factors:

1. Independent obligations constraining the individual.
2. Susceptibility to manipulation via external pressure.
3. Independent verification and public scrutiny.
4. Robust prophylactic trading rules and surveillance.

The DMO expects surveillance to identify potential controllers and known insiders. Platforms must implement position limits so that manipulation becomes economically irrational.

State regulators and judicial setbacks

State regulators continue to challenge federal authority in the courts. The Ninth Circuit held that the Commodity Exchange Act does not preempt Nevada state law from enforcing gambling laws against Kalshi’s sports event contracts; this ruling prevents such platforms from providing sports contracts in California, Washington, Arizona, Oregon, Idaho, Montana, Alaska, and Hawaii. This ruling follows a decision from the Sixth Circuit on September 28, 2026, which also found that these contracts are not "swaps." The Ninth Circuit panel emphasized that an expansive reading of the term "swap" would transform ordinary sports wagers into federally regulated derivatives. The Ninth Circuit also noted that Kalshi’s marketing used the language of "betting" to frame its platform as a workaround for traditional sportsbooks. In a separate September 16, 2026, ruling, the Ninth Circuit held that California tribes could likely succeed in claims that Kalshi’s sports-event contracts constitute Class III gaming on tribal lands. Arizona has even filed criminal charges against Kalshi regarding allegations of operating an unlicensed gambling business. New York is also seeking $36 billion in damages from Kalshi. While Kalshi argues that election contracts do not involve unlawful activity, state attorneys general in over 20 states contest the idea that prediction markets fall under exclusive federal jurisdiction. Does the Supreme Court eventually resolve this conflict between state gambling laws and the CFTC?

Market shifts and platform realities

Regulatory changes drive immediate changes in product availability. Coinbase announced it will disable its margin trading product on November 25, 2026, following new CFTC guidance. Conversely, Crypto.com secured an amended Derivatives Clearing Organization license to provide margined derivatives in the US. DraftKings discontinued its Reignmakers NFT marketplace and fantasy game because a court rejected its motion to dismiss a class action lawsuit alleging these tokens are unregulated securities. You should watch how these regulatory pressures change your choice of platform.

Polymarket reached $10.57 billion in monthly trading volume in March 2026. In contrast, Kalshi processed $23.8 billion in 2025 and reached a $100 billion lifetime volume milestone in May 2026. Polymarket focuses on sports markets in its US version, while Kalshi’s sports contracts drive roughly 85% of its volume.