‘Mention Markets’ Might be on Their Last Legs at U.S.-Facing Prediction Markets
Donald Trump (Credit: Gage Skidmore/Flickr)
Top prediction market Kalshi has used the marketing slogan “Trade on Anything,” but federal regulators seem increasingly wary of that business model. The Commodity Futures Trading Commission (CFTC) is looking into the utility of “mention markets,” according to a report from NPR.
Mention markets allow users to trade contracts on whether people will say certain things in public appearances. For instance, a Kalshi market that resolves later today concerns whether President Donald Trump will say various things during an appearance in New York. These include:
- Biden (92% chance)
- Stock market (85% chance)
- America first (55%)
- Zohran Mamdani (42%)
- Knicks (11%)
If Trump says the words, the markets resolve as Yes. If he doesn’t, they resolve as No.
In response to the probe, NPR reported that Kalshi has taken down all of its sports-related mention markets. Generally, these revolve around what a broadcaster will say. However, its political and financial mentions remain accessible.
If this is the first step toward eliminating mention markets, it marks a major shift in the regulatory climate around the vertical in general. Permissiveness has been the order of the day to this point, but the CFTC seems increasingly interested in placing guardrails around prediction markets.
Why Might the CFTC Investigate Mention Markets?
According to NPR’s reporting, the markets have been taken down “until further notice.” The CFTC, it noted, wants to take a look at whether some of them “make sense.”
What “make sense” might mean is up to interpretation.
The idea that these markets are financial instruments is a tough sell in general, but one can at least construct an argument that a game between the Rams and the Seahawks has financial consequences. It’s a lot tougher to make that same case when offering shares of whether Greg Olson will say “analytics” during the Rams vs. Seahawks broadcast.
Mention markets have become a somewhat popular bet for traders — the aforementioned Trump ones have attracted $850,000 in volume — but they’ve also proven problematic.
In some cases, speakers garbling their words or saying adjacent ones (“China” versus “Chinese”) has led to disputed outcomes.
The markets are also vulnerable to insider trading. The most high-profile example involved a White House teleprompter operator. He reportedly raked in some profits (and a settlement) based on knowledge of Trump’s speech scripts. However, many niche mention markets have had issues as well. An editor for top content creator Jimmy “MrBeast” Donaldson was caught pocketing a few thousand dollars trading on things that MrBeast would say on stream.
Sports Mention Markets vs. Political and Others
While Kalshi has taken down its sports-related mention markets, others remain active. The following sub-tabs under “Mentions” remain:
- Public Companies Hub
- Earnings
- Politicians
- Trump
The Trump markets do orders of magnitude more volume than any of the others.
According to the NPR report, top Kalshi executives view the mention markets as a key lure for customers outside of sports betting. Kalshi has worked hard to position itself as something other than a sportsbook despite sports accounting for an estimated 80% of its volume.
Event Horizon reported that sports mention markets have done about $340 million in volume since Kalshi dove into sports contracts. Only Trump-related mentions — at about $420 million — have done more. In total, mention markets have done about $1.2 billion in volume.
While that might seem impressive, note that during World Cup trading, the finals between Spain and Argentina alone did almost $1.9 billion.
Sports Mentions May Be Seen as a Proxy for Prohibited Bets
There are two likely reasons that Kalshi and the CFTC might be more worried about sports mentions than other, similar markets. The potential for market manipulation is the same in all cases, but there are additional concerns when it comes to sports.
For one thing, sports event contracts in general are at greater legal risk than other prediction market offerings. With a likely Supreme Court case looming, it may just be good practice to set aside anything that creates new integrity issues for sports.
On top of that, however, is the possibility that traders were using sports mentions as a proxy for types of sports wagers that the CFTC has indicated it will ban. For instance, markets on athlete injuries will not be permitted, yet the word “blood” was among the most popular mention words to bet on among UFC traders. Betting on whether there will be a penalty kick during a soccer match will likely be prohibited by the proposed bans on markets related to officiating or the results of single plays, but betting on an announcer saying the word “penalty” would have been allowed.
CFTC Increasingly Working to Rein in Prediction Markets
As prediction markets have come under increasing social and political fire, the CFTC may be looking to start placing guardrails around the industry, which has infamously operated with near impunity. CFTC rules require that markets not be “readily susceptible to manipulation.”
But the regulatory agency has largely taken a hands-off approach. Even as critics attacked prediction markets, the industry’s backers stressed the need to “embrace innovation” and avoid “onerous” regulations.
That may be changing, though.
The CFTC’s recent actions seem to signal a change in tune. It issued an advisory to designated contract markets (DCMs) last week, nudging them not to list pricing in “American-style” betting odds. It issued guidance on so-called “incentive” programs, saying they contain “procedural or substantive deficiencies.” Speculation swirled that this was a rebuke of Kalshi’s “randomized deposit bonus” program.
Now, the agency has begun a review of mention markets. While only sports mention markets that do a relative pittance in trading volume have come down for the moment, the industry appears to be tracking toward a world where financially ambiguous markets become a regulatory no-go. Political and financial mentions seem like the logical next dominoes to fall, as “trade on anything” becomes “trade on some things.”
Image credit: Gage Skidmore/Flickr (license)
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