On February 25, 2026, the U.S. Commodity Futures Trading Commission (“CFTC”) Division of Enforcement released an advisory, reminding market participants of the agency’s authority to pursue misuse of material nonpublic information to trade, and other forms of market abuse, in the nascent prediction markets (the “Advisory”).
1 The Advisory follows the public release of two enforcement actions against traders on a U.S. predication market trading platform.
2 Although the trading platform handled the investigations internally, the CFTC utilized the opportunity to emphasize its “full authority to police illegal trading practices” occurring on any Designated Contract Market (“DCM”), including prediction markets.
Incident disclosures
In the first incident, a political candidate running in a gubernatorial election allegedly placed $200 trades on his own candidacy. According to the CFTC, social media posts from May 2025 contained videos of the alleged improper trading. The compliance team contacted the candidate, who acknowledged that the trades were improper and in violation of the platform’s rules prohibiting trading in a contract over which the trader has direct or indirect influence over the outcome.
3 The prediction market trading platform imposed a $2,000 penalty for the trades and disgorgement of profits in the amount of $246.36 and suspended the user for five years.
4
In the Advisory, the CFTC explained that the trade potentially violated Section 6(c)(1) of the Commodity Exchange Act (the “Act”) and Commission Regulation 180.1(a)(1) and (3) for use of a manipulative scheme or artifice to defraud or engaging or attempting to engage in an act, practice, or course of business that operates as a fraud on any other person.
In the second incident, a former editor of a popular YouTube channel, who allegedly had access to material nonpublic information, placed near-perfect trades on that information, which raised flags at the trading platform.
5 The trading platform noted that the trades were “statistically anomalous.”
6 After an internal investigation, the trading platform concluded that there was a reasonable belief that the trades were based on material nonpublic information misappropriated in violation of a preexisting duty, and suspended the user from direct or indirect access to the platform for two years. The trading platform also imposed a $15,000 penalty against the trader and disgorgement of profits in the amount of $5,397.
The trade potentially violated prohibitions on misappropriation of confidential information in breach of a pre-existing duty of trust and confidence (
i.e., insider trading) under Section 6(c)(1) of the Act and Regulation 180.1(a)(1) and (3).
CFTC’s response to incident disclosures
The CFTC views its authority as extending not only to the examples above, but also to incidents including pre-arranged, noncompetitive trading and wash sales under Sections 4c(a)(1) and 2(a) of the Act and Regulation 1.38(a), other prohibited practices including disruptive trading pursuant to Section 4c(a)(5), and fraud and manipulation under the Act. The Advisory reminds DCMs of their independent duty to maintain audit trails, conduct surveillance, and enforce rules against prohibited practices under Section 5(d) of the Act. The Enforcement Division noted that it will continue to coordinate with DCMs regarding their enforcement dockets.
Looking ahead
Within the first two months of the year, the CFTC has positioned itself squarely as the regulator of prediction markets. In addition to the Advisory, on February 17, 2026, the CFTC filed an amicus brief in the Ninth Circuit Court of Appeals, asserting its exclusive jurisdiction over prediction markets,
7 consistent with CFTC Chairman Michael Selig’s prior statement in the Wall Street Journal that the CFTC would intervene in such cases to prevent state encroachment.
8 The Advisory serves as yet another reminder that the CFTC intends to vigorously assert its authority over prediction markets.
Footnotes
1. CFTC Enforcement Division Issues Prediction Markets Advisory, U.S. Commodity Futures Trading Commission (Feb. 25, 2026) (“CFTC Prediction Market Advisory”)
https://www.cftc.gov/PressRoom/PressReleases/9185-26.
2. Two Insider Cases We’ve Recently Closed, Kalshi News (Feb. 25, 2026) (“Incident Disclosure”)
https://news.kalshi.com/p/kalshi-trading-violation-enforcement-cases.
3. Incident Disclosure.
4. CFTC Prediction Market Advisory.
5. Incident Disclosure.
6. Id.
7.
Brief for Commodity Futures Trading Commission as Amici Curiae Supporting Appellant, North American Derivatives Exchange, Inc. D/B/A Crytpto.com v. Nevada, No. 25-7187 (9th Cir. Feb. 17, 2026) (asserting exclusive federal jurisdiction for prediction markets under the Commodity Exchange Act).
8. Michael S. Selig, States Encroach on Predication Markets, Wall Street Journal, Feb. 16, 2026 (https://www.wsj.com/opinion/states-encroach-on-prediction-markets-6eb43af9).
