Prediction markets face CFTC scrutiny ahead of 2026 US midterms

CFTC Chairman Michael Selig has said the agency is monitoring prediction markets for possible manipulation ahead of the 2026 U.S. midterm elections, according to reporting on his latest television interview.

Bloomberg’s Oct. 23 interview with Selig covered election-market surveillance alongside an investigation into oil trading during the Iran war, according to an accessible summary of its reporting. The summary says the agency is watching for signs of manipulation ahead of the midterms, without identifying a new election-related enforcement case.

The remarks concern a market that already holds hundreds of millions of dollars in open positions. Dune’s Oct. 20 research put combined midterm open interest on Kalshi and Polymarket at $250 million as of Oct. 18.

The accessible account of the interview does not identify either operator as the subject of a new manipulation finding. Separate CFTC records document completed actions against individual traders and requirements for exchanges listing contracts tied to personal conduct.

Prediction markets hold $250 million in midterm positions

Dune attributed $210 million of midterm open interest to Kalshi and $40 million to Polymarket in its dated snapshot. Its figures put Kalshi’s share at 84%, with the two platforms recording $59 million in combined notional trading during the seven days through Oct. 18.

Over the election cycle, Dune counted $353 million in notional volume on Kalshi and $160 million on Polymarket. The research separately reported cash volume of $147 million and $77 million, respectively, distinguishing those figures from notional trading and outstanding positions.

The same analysis found that 24,930 Polymarket wallets held midterm positions, with a median position of $14. Its top 100 wallets accounted for 56% of position value; wallet counts do not establish the number of individual people trading.

Dune’s figures describe activity through Oct. 18, not current balances or a finding of misconduct. Its published snapshot does not establish that large positions, concentrated holdings, or differences in market prices resulted from manipulation.

CFTC orders show penalties and trading bans

An Aug. 28 CFTC settlement provides a documented example of enforcement involving confidential government information. The agency ordered former White House teleprompter operator Gabriel Perez to return $107,539.02 in trading profits and pay a $65,000 civil penalty.

The regulator found that Perez used advance access to presidential speeches to trade contracts based on words or phrases the president would say. Its release dates the trading to December 2025 through February 2026 and says he breached a duty of trust and confidence.

Perez received a three-year trading ban and agreed to stop further violations of the Commodity Exchange Act and agency regulations. The CFTC said his cooperation earned a substantial penalty discount and credited KalshiEX with assisting the investigation.

A separate July 31 settlement concerned former Rep. George Santos trading on whether he would attend the 2026 State of the Union address.

The CFTC found that Santos bought and sold positions while making material misrepresentations and omissions on social media about his attendance plans. Prices subsequently moved in directions favorable to his positions, according to the agency’s account.

Santos was ordered to return $17,569.98 in profits and pay a $17,500 civil penalty. His settlement imposed a three-year trading ban and required him to cease further violations.

Mention contracts face contract-specific scrutiny

CFTC staff addressed another part of exchange oversight in a Sept. 22 advisory covering contracts tied to a named person’s words, attendance, appearances or interactions. Staff said settlement based on personal conduct can create heightened manipulation risks.

As crypto.news previously reported, the guidance warned exchanges about mention contract risks and called for safeguards tailored to the particular product.

The agency’s announcement reminded designated contract markets of Core Principle 3, which requires them to list only contracts that are not readily susceptible to manipulation. Staff called for complete, contract-specific analysis in submissions made under Part 40 of the commission’s regulations.

In an Oct. 2 legal analysis, Husch Blackwell attorneys Jeff Le Riche and Kip Randall explained that the advisory neither banned mention contracts outright nor created new legal obligations. Their assessment described heightened scrutiny for exchanges listing or seeking to list those products.

The attorneys distinguished contracts controlled by an individual’s conduct from products settling on independently generated, externally verifiable outcomes, including election results and economic releases.

Federal jurisdiction remains a separate court dispute

The CFTC has defended its claimed authority over prediction markets through court filings. In a May 12 announcement, the commission said it submitted an amicus brief in KalshiEx LLC v. Matthew T. Schuler in the U.S. Court of Appeals for the Sixth Circuit.

Its position was that the federal regulatory framework preempts state laws as applied to CFTC-regulated markets. The announcement identified the proceeding as case No. 26-3196 and asked the appeals court to correct what the agency described as an improperly narrow reading of its jurisdiction by the Ohio federal district court.