A public disagreement between two of the most prominent figures in U.S. derivatives markets highlighted growing industry divisions Thursday over whether the Commodity Futures Trading Commission has allowed prediction markets to expand without adequate scrutiny.
Key Takeaways
- CME chair Terry Duffy criticized the CFTC’s oversight of prediction markets, citing concerns about potentially manipulable event contracts.
- Kalshi cofounder Luana Lopes Lara pushed back, arguing that new markets inevitably carry risks and should be addressed through regulation.
- The dispute highlighted a growing divide between traditional derivatives exchanges and prediction market operators over regulation and innovation.
CME Group chair Terry Duffy accused federal regulators of allowing potentially manipulable event contracts to reach consumers, drawing a sharp response from Kalshi cofounder Luana Lopes Lara during the inaugural meeting of the CFTC Innovation Advisory Committee. CFTC chairman Michael Selig also interjected to challenge examples Duffy used to support his argument.
Duffy said approximately 2,500 contracts have been self-certified since the current presidential administration took office in January 2025, none of which the CFTC opposed. The process generally allows regulated exchanges to list contracts without affirmative commission approval if they certify that the products comply with federal law and CFTC rules.
“There’s been a lot of self-certifications around products that are in violation of (federal) core principle three, which is susceptible to manipulation,” Duffy said. “There’s no doubt about it.”
Duffy pointed to contracts associated with President Donald Trump’s teleprompter and the capture of Venezuelan President Nicolas Maduro as examples. Selig interrupted to note that those products were not listed on a CFTC-regulated U.S. exchange.
CME’s longtime CEO acknowledged that the contracts appeared on Polymarket’s offshore platform but maintained they illustrated broader concerns about event contracts whose outcomes can be influenced by individuals.
“That’s neither here nor there,” Duffy said. “I’m just bringing it up. That’s not good for markets.”
Kalshi pushes back
Lopes Lara later challenged Duffy directly, asking whether CME had ever experienced manipulation or other market problems during its more than a century of operations. Duffy, who has been with the group since 1995, responded that CME employs more people in its regulatory department than Kalshi employs across its entire company.
“Maybe you should learn a bit about efficiency then,” Lopes Lara said.
“Maybe you should learn about credible markets,” Duffy responded.
Lopes Lara argued that every market carries risks and that regulatory oversight is intended to identify and address misconduct rather than prevent new markets from developing.
“Every nascent market will have risks as well, and they’re having issues in every single traditional market, in every single exchange here onshore and offshore,” Lopes Lara said.
The exchange underscored the widening competitive and philosophical divide between established derivatives exchanges and prediction platforms that can rapidly introduce a growing range of contracts tied to sports, politics, economics, and other events. Kalshi has also begun moving closer to products traditionally associated with futures exchanges, adding to the potential commercial tension.
Selig did not dismiss manipulation concerns. However, his intervention distinguished between contracts available through regulated U.S. exchanges and those offered overseas, a significant difference as the CFTC considers how to oversee the expanding industry.
CME, the world’s largest futures exchange operator, has moved closer to event-based retail trading through a partnership with FanDuel announced in 2025. Still, Duffy argued Thursday that contracts tied to subjects such as hot dog eating contests or whether public figures say particular words risk diminishing the reputation of U.S. financial markets.
“I think it's important for us to go forward as innovators on markets that have a level playing field and make sure that the consumer is always protected,” Duffy said.
Additional perspectives
Thursday’s CFTC Innovation Advisory Committee meeting, held in Washington, D.C., brought together more than a dozen prediction market leaders along with CME and Kalshi, including top executives from FanDuel, DraftKings, Fanatics, Coinbase, Polymarket, and Robinhood.
Robinhood CEO Vlad Tenev offered a more measured view of the tension between regulation and innovation. Although Tenev defended federal regulation of prediction markets, he said contracts based on whether someone mentions a particular word can be especially vulnerable to influence, including by people who may not realize they are affecting a market.
Duffy warned that allowing questionable contracts to proliferate could have consequences extending beyond prediction platforms.
“We’re not a bunch of carnival barkers at a circus,” Duffy said. “We are running the most enviable markets in the world in the United States of America.”
