CFTC Warns Prediction Markets Over Manipulation Risks In ‘Mention’ Contracts

TL;DR The CFTC’s Division of Market Oversight has issued guidance on prediction contracts that settle based on whether a person says, mentions or does something. The regulator says these ‘mention markets’ can carry heightened manipulation risk when settlement depends on conduct that is not independently generated or verifiable. The advisory is staff guidance, not a new federal statute. The US Commodity Futures Trading Commission is drawing a sharper line around one of prediction markets‘ stranger product categories: contracts that settle based on whether a person says a particular word, appears at an event or takes a specific action. The agency’s Division of Market Oversight issued a staff advisory on September 22 addressing so-called “mention markets.” CFTC Flags A Different Kind Of Manipulation Risk Traditional derivatives are usually tied to prices, rates or measurable external events. Mention markets can be different. If a contract pays out depending on whether an identifiable person says a phrase, attends an event or interacts with somebody else, the person at the center of the market may be able to influence the outcome directly. The CFTC says that creates heightened manipula...