The U.S. Commodity Futures Trading Commission (CFTC) has issued a stern reminder to online betting exchanges that offering event contracts related to criminal activities is strictly prohibited. This warning specifically targets prediction markets operating as derivative financial markets.

Under CFTC Regulation 40.11, event contracts referencing terrorism, assassination, war, gaming, or any unlawful activities under state or federal law are banned as they are deemed "contrary to the public interest."

The warning came after Kalshi, a regulated prediction market, launched contracts related to Luigi Mangione, the suspected killer of UnitedHealthcare CEO Brian Thompson. These contracts included predictions about Mangione's extradition to New York, potential guilty plea, and possible conspirators. Kalshi promptly removed these contracts within 48 hours after regulatory notification.

While U.S.-regulated exchanges must comply with these restrictions, offshore platforms like Polymarket continue to offer such contracts. For instance, Polymarket currently hosts 10 Mangione-related contracts, with one contract about the authenticity of his YouTube channel attracting over $441,000 in wagers.

Despite recent federal court decisions allowing prediction markets to accept bets on the 2024 presidential election, the industry faces ongoing criticism. Critics, including Better Markets' derivatives policy director Cantrell Dumas, argue that these markets essentially amount to gambling on serious criminal matters.

The regulatory landscape may shift under a potential second Trump administration, which has promised significant deregulation, pledging to eliminate ten federal regulations for every new one implemented.

Related Articles

Previous Articles