Federal regulators are looking into the legitimacy of mention markets offered by prediction platforms, which pay users who correctly pick words or phrases used during live events, NPR first reported.
The Commodity Futures Trading Commission (CFTC), the federal body in charge of prediction markets, is leading the investigation.
Key Takeaways
- Kalshi shut down mention markets in sports, but not in other industries.
- Polymarket offers mention markets globally, but not in the U.S.
- Concerns center on how easy mention markets are to manipulate.
Mention markets are available in a variety of industries, including sports, finance, and entertainment. Traders are allowed to pick “Yes” or “No” from a list of provided vocabulary options and will win or lose money depending on if a speaker, narrator, commentator, or any individual says one of the selected words or phrases.
Kalshi already pulled its mention markets for sports events upon learning of the investigation, according to NPR. Mention markets based in other industries are still available.
An anonymous source referenced by NPR said that Kalshi’s sports mention markets will not be available “until further notice,” and it is unclear when they will return.
Polymarket, Kalshi’s top competitor, still has mention markets on its global trading hub, but not its smaller American platform.
Sports are responsible for more than 80% of activity at prediction markets, which generated $50.6 billion in combined notional trading volume at Kalshi, Polymarket, and Polymarket US in July. But despite their popularity, sports are not the primary issue.
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Mention markets on the way out?
The investigation into mention markets comes almost exactly one month after it was revealed that President Donald Trump’s teleprompter operator won six figures by predicting words and phrases his boss would say during various speeches. The man, Gabriel Perez, would even sell his positions during live events if Trump skipped a section that he had planned to discuss.
Kalshi claimed that its internal monitoring tools allowed it to identify and report the suspicious activity, eventually leading to an investigation and settlement without criminal punishment.
The issue still remains that mention markets are easy to influence and interfere with. Individuals can use seemingly common verbiage for the benefit of prediction market traders without showing blatant attempts at manipulation.
“These mention markets are not popular across the political aisle,” an NPR source with knowledge of the investigation said. “They are potentially very easy to manipulate, so the CFTC is taking a hard look at whether some of them make sense.”
Prediction operators’ rules and regulations prohibit them from offering markets that are easily manipulable. A former Kalshi employee who spoke to NPR anonymously said that there is growing internal feeling that mention markets do not meet this criterion, since the nature of the markets invites nefarious interference.
Prediction market scandals
Prediction market news, if not related to legal squabbles between states, operators, and the CFTC, has centered on recent scandals.
Ex-congressman George Santos recently agreed to settle with the CFTC after he allegedly misled the public by promising he would attend the State of the Union address in February, only to fail to show up.
A U.S. soldier was also charged with using confidential information to win more than $400,000 by predicting the capture of former Venezuelan leader Nicolás Maduro.
