CME CEO Terrence Duffy trades barbs with CFTC's Selig and Kalshi's COO over prediction market oversight

A Commodity Futures Trading Commission committee meeting exposed a sharp divide between the worlds of traditional finance and prediction market platforms and how the rapidly growing sector should be regulated.

On Thursday during a CFTC Innovation Advisory Committee meeting, CME CEO Terrence Duffy raised concerns about prediction-market contracts, arguing that some markets are vulnerable to manipulation. Duffy has previously called for greater oversight, as CME has embraced the sector — its derivatives exchange has launched more than 100 million event contracts since launching them last year.

Duffy said he was particularly concerned about the number of contracts that have been self-certified and the potential for manipulation in certain markets, including contracts tied to what President Donald Trump would say during his State of the Union address and when Venezuelan President Nicolás Maduro would be ousted.

"There are definitely people that are manipulating these contracts," Duffy said. "That is not good for our industry. That is horrible for our industry."

Duffy pointed to Trump’s goal of making the U.S. the “crypto capital of the world,” arguing that markets susceptible to manipulation could undermine that effort.

"By listing susceptible markets to manipulation is really doing the opposite of what we're trying to effectuate," he said.

CFTC Chair Michael Selig then interrupted Duffy to say that the products mentioned had not been listed in the U.S.

"This occurred offshore, and that's fake news," Selig said.

"I'm just bringing it up, that's not good for markets," Duffy said in response. "We can get into a back and forth if you like. I'm happy to do that too."

At a crossroads

The prediction markets industry has reached a critical juncture as federal regulators and state officials battle over who should oversee the rapidly expanding market.

State officials across the country have increasingly raised concerns about prediction markets, an industry now valued at billions of dollars. Much of the concern has centered on platforms offering sports-related contracts, which states argue can amount to gambling and violate their gaming laws.

However, Selig has said the agency has "exclusive jurisdiction" over prediction markets, including sports-related contracts, and has sued several states as the federal government and state regulators clash over how the industry should be regulated. The CFTC has also put forth a proposed framework for regulating prediction markets.

During Thursday's meeting, Selig said he expects the CFTC to propose more amendments to its rules on how designated contract markets list event contracts and put in place more consumer protection standards.

"We’ve heard the concerns of public commenters about inadequate consumer protections for retail loud and clear," Selig said.

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Insider trading

In Washington, lawmakers have raised concerns about insider trading in prediction markets amid high-profile cases where a U.S. active soldier was accused of using secret intel to make a bet on Polymarket about Maduro's capture and Trump's longtime teleprompter operator allegedly using insider knowledge to place bets on Kalshi related to the president's State of the Union Address.

Lawmakers have introduced bills to bar prediction contracts tied to sports or casino-style games from being listed or traded on a registered platform. The Senate has also passed a legislative measure to ban themselves from transacting on prediction markets.

Both Kalshi and Polymarket have said they have put out new measures to curb insider trading and market manipulation.

The tensions resurfaced later in Thursday’s meeting when Kalshi Chief Operating Officer Luana Lopes Lara turned to Duffy and asked if CME had ever faced problems with market manipulation.

"I have more people in my regulatory department than you and your entire company," Duffy said.

"Maybe you should learn a bit about efficiency then," Lopes Lara said.

"Maybe you should learn about credible markets," Duffy said.