Federal Government Warns Prediction Markets Against Crime-Related Betting Contracts
The U.S. Commodity Futures Trading Commission (CFTC) has issued a warning to online betting exchanges about offering event contracts linked to criminal activities. This reminder specifically targets prediction markets that operate as derivative financial platforms.
Handcuffed man sitting in chair
Under CFTC Regulation 40.11, exchanges are prohibited from offering contracts related to:
- Terrorism
- Assassination
- War
- Gaming
- Any unlawful activities under state or federal law
This warning came after Kalshi, a regulated prediction market, launched contracts related to Luigi Mangione, the suspect in the UnitedHealthcare CEO Brian Thompson killing. The contracts, which included questions about Mangione's extradition and potential plea, were quickly removed following regulatory notice.
While U.S.-regulated platforms must comply with these restrictions, offshore cryptocurrency-based platforms like Polymarket continue to offer similar contracts. For instance, Polymarket currently hosts 10 Mangione-related contracts, with one contract about his YouTube channel attracting over $441,000 in wagers.
Critics, including Better Markets' derivatives policy director Cantrell Dumas, argue these prediction markets essentially function as gambling platforms. However, the industry recently gained some legitimacy when federal courts allowed betting on the 2024 presidential election.
The future regulation of prediction markets may shift under the next administration, with Trump promising significant deregulation efforts, including a pledge to eliminate 10 federal regulations for every new one implemented.
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