CME CEO Says Prediction Markets Are Vulnerable to Manipulation in Clash With CFTC, Kalshi

A dispute over how to regulate prediction markets spilled into public view, setting traditional finance against the prediction-market industry.

The Block, a cryptocurrency-focused media outlet, reported on August 20 that CME Group Chief Executive Officer Terry Duffy called for tighter oversight at a meeting of the Commodity Futures Trading Commission's Innovation Advisory Committee, saying some prediction-market contracts are susceptible to manipulation.

Duffy pointed to contracts tied to comments in President Donald Trump's address to Congress and to the timing of Venezuelan President Nicolas Maduro's ouster. "There are clearly people manipulating these contracts," he said. "That is very harmful to our industry."

He added that allowing markets vulnerable to manipulation runs counter to Trump's goal of making the US a hub for digital assets.

CFTC Chairman Michael Selig immediately pushed back, saying the products Duffy cited were not listed in the US and traded offshore. "That's fake news," Selig said. Duffy responded that his point was that such activity is still bad for the market, extending the brief exchange.

The fight over regulatory jurisdiction is also continuing. Selig has argued that the CFTC has exclusive authority over prediction markets, including sports-related contracts. The agency is also in litigation with some state governments over the issue.

Selig said on August 20 that the commission had heard ample public comment on strengthening consumer protections and plans to make an additional proposal to revise rules governing the listing of event contracts on designated contract markets.

In Washington, allegations of insider trading tied to prediction markets have also surfaced. Questions have been raised over whether an active-duty service member used classified information to bet on Polymarket on Maduro's arrest and whether a teleprompter operator for Trump used information related to the president's address to Congress to place bets on Kalshi.

That has spurred action in Congress. Lawmakers have introduced a bill that would ban the listing of sports- and casino-style prediction contracts, and the Senate passed legislation barring members of Congress from trading in prediction markets.

Tensions flared again later in the meeting when Kalshi Chief Operating Officer Luana Lopes Lara directly targeted Duffy. After Lopes Lara asked whether CME had also dealt with market-manipulation problems, Duffy replied that CME's regulatory staff alone outnumbered Kalshi's entire workforce.

Lopes Lara answered that CME might need to learn something about efficiency. Duffy fired back: "Learn first what a trustworthy market is."