Federal regulators have opened an investigation into so-called “mention markets” on prediction market sites, where people bet millions of dollars on what a speaker can or cannot say. Erin Hooley/AP Photo/Erin Hooley/AP hide caption toggle caption Erin Hooley/AP Photo/Erin Hooley/AP Federal regulators have launched a review of so-called “mention markets” on prediction market sites, where bettors wager millions of dollars on the word choices of everyone from President Trump to football sports commentators, according to two people with direct knowledge of the investigation who spoke to NPR on condition of anonymity because they were not authorized to speak. publicly. In response, Kalshi, the largest U.S. prediction market, removed all of the aforementioned markets from its sports betting offerings as the Commodity Futures Trading Commission continues its investigation, according to one of the people. While most on-site sports bets involve game action, this type of spread bet has become increasingly popular, allowing people to bet money on whether a sportscaster will say things like “MVP,” “ankle,” or “redshirt.” These markets have now been closed “until further notice” and it is unclear when or if Kalshi will bring them back, the person said. Sports betting accounts for more than 80% of the billions of dollars traded each week on the site, so removing mention markets for sporting events will significantly reduce the category. Kalshi still allows bets related to what people say at political events, on earnings calls and during live television newscasts. Washington’s heightened scrutiny of one of the most controversial areas of the burgeoning prediction market sector comes after a high-profile incident involving betting on a speaker’s words reached the White House. Last month, regulators revealed that President Trump’s former teleprompter operator was using Kalshi to profit from correct bets on what words the president would or would not say during public appearances. Kalshi said its internal surveillance tools detected the suspiciously timely bets and reported them to federal authorities. “These mention markets are not popular across the political spectrum,” said the other person with knowledge of the investigation who requested anonymity to discuss internal deliberations at the CFTC. “They are potentially very easy to manipulate, so the CFTC is taking a hard look at whether some of them make sense.” Spokespeople for Kalshi and the CFTC declined to comment. Polymarket, Kalshi’s main competitor, also offers listed markets, but only on its popular offshore site, which is not regulated by the CFTC. Polymarket’s smaller US service does not mention markets. The vast majority of prediction markets are “self-certified,” meaning the betting platform can launch a market as long as it files paperwork with federal officials saying the market meets the rules for something known as a “swap,” a type of financial derivative. One of those rules requires prediction market operators to claim that the market cannot be “easily susceptible to manipulation,” inviting bad actors or insider traders to make profits by manipulating a market. There is growing concern among Kalshi’s lawyers and federal regulators that betting on certain types of speaking events runs counter to this principle, as the very nature of some markets attracts potential manipulators, according to the second person familiar with the CFTC investigation and a former Kalshi employee who spoke to NPR on condition of anonymity because they were not authorized to speak publicly for fear of retaliation. Within Kalshi, employees have debated the usefulness of mention markets, with Kalshi co-founder Luana Lopes Lara especially advocating for them, according to the former Kalshi employee. Lopes Lara believes that betting on the words people say at an awards show, a reality TV show or on an earnings call is a way to attract people to prediction markets in ways other than sports. Sports events are what most merchants turn to to bet on, however, the area has become incredibly litigious for the company, as it faces more than two dozen lawsuits from states and tribes over sports betting. Betting on the literal words that come out of someone’s mouth has led to absurd results. During the live telecast of the World Cup final on Fox, Kalshi traders were placing million-dollar bets on who would attend. When one of Fox’s sports hosts mistook Matt Damon for Brad Pitt, several news organizations wrongly reported that Pitt was there. Some of those news outlets were what Kalshi calls “source agencies,” or news organizations that help sort out their markets or determine whether the event being bet on happened or not. After the Fox sportscaster got it wrong, Kalshi’s market decided to have Pitt attend, strictly following the rules of his contract, even though the actor wasn’t actually there. Kalshi’s data shows that people who bet that Pitt wasn’t there collectively lost $287,866.
