The first meeting of the Advisory Board on Innovation of the United States Commodity Futures Trading Commission (CFTC) focused on forecasting markets. Participants were from Polymarket, Kalshi, Coinbase, Robinwood, NASDAQ and CME. While encryption and AI regulation were also discussed at the meeting, the debate focused most on the manner in which the incident contract was put on hold, the risk of manipulation and subsequent regulatory arrangements.
Self-accreditation as a point of contention
At the meeting, Terry Duffy, Chairman and Chief Executive Officer of the CME Group, most strongly questioned the current practice of forecasting markets. Under the Merchandise Transactions Act, the Platform may submit and certify an incident contract without prior authorization from the CTC, a mechanism known as “self-certification”.
Duffy believes that this approach, while allowing the platform to access new contracts more quickly, may also magnify the risk of market manipulation. He indicated that, since January 2025, some 2,500 self-certifications had been submitted and none had been objected to; some of the products had, in his view, touched upon core principles.
The mechanism was defended by the co-founder of Kalshi, Luana Lopes Lara. She indicated that the market was expected to face a very time-bound event and that the platform needed to move forward faster to meet user needs. The direct engagement of the parties on market manipulation and internal transaction risks in the meeting arena suggests that regulatory discussions have entered a more detailed level of implementation.
The reference to a market is named
The CEO of Robinwood, Vlad Tenev, mentioned at the meeting another type of product of concern, namely, “reference to the market”. Such contracts usually revolve around whether a public figure will say a word at a speech, event or financial conference.
It was felt that such products were more vulnerable to information advantages or human-induced guidance and should therefore be given priority attention. Duffy also referred to several recent law enforcement cases related to the forecast market, including a note about the arrest of Venezuelan leader Maduro, and a federal investigation related to the content of Trump ' s speech.
Tenev did not advocate a direct ban on such markets, but suggested that regulators should examine them more closely, particularly with regard to their vulnerability to manipulation.
CFTC proposes a three-step route.
In his opening remarks, the Chairman of CTC, Michael Selig, proposed a three-step arrangement for predicting market regulation. The first step would be to move forward with the June revision of the rules to clarify which incident contracts CFTC could prohibit, and to further define the concept of “roar” and public interest criteria.
The second step is to update the reporting framework for a full mortgage contract. The third step would be to continue to revise the rules for the appointment of contracts for events on the contract market (DCM) and to improve consumer protection requirements. Selig stated that the role of the Advisory Board was to provide input to the follow-up decision of the CTC.
The day before the meeting, the White House had just met with the head of the encryption industry, as did Selig and Paul Atkins, Chairman of the United States Securities and Exchange Commission. Selig also publicly criticized the Attorney General of New York, Letitia James. In July of this year, the state of New York sued Kalshi for local “illegal gambling” operations; on August 11, CFTC issued an emergency order requesting Kalshi to continue to provide an incident contract in New York.
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