CFTC Chairman Michael Selig stated in a recent television interview that the agency is actively monitoring prediction markets for potential manipulation as the 2026 U.S. midterm elections approach. This surveillance effort aligns with earlier September guidance which called for specific safeguards for contracts tied to individual words or actions, reflecting a regulatory focus on election-related trading activity.
Market data indicates that Kalshi and Polymarket collectively held $250 million in open interest related to midterms as of October 18. The Commission's scrutiny follows previous settlements involving Gabriel Perez and George Santos, which imposed financial sanctions and three-year trading bans, establishing a precedent for enforcement actions against market participants who may have violated regulatory standards.
Regulatory Scrutiny Before Elections
According to a readily available summary of its reporting, Bloomberg's interview with Selig on October 23 examined election-market surveillance in conjunction with an inquiry into oil trading related to the Iran conflict. The summary notes that the agency is monitoring for potential manipulation indicators before the midterms, though it does not cite a new enforcement case connected to elections.
These comments relate to a marketplace containing hundreds of millions of dollars in open positions; Dune's research from October 20 indicated that combined midterm open interest on Kalshi and Polymarket reached $250 million by October 18. The available account of the interview fails to name either operator as the target of a fresh manipulation determination, whereas distinct CFTC records show finished actions against specific traders and mandates for exchanges listing contracts linked to personal behavior.
According to a dated snapshot from Dune, Kalshi accounted for $210 million in midterm open interest while Polymarket held $40 million. This distribution resulted in an 84% market share for Kalshi, and the pair generated $59 million in combined notional trading over the seven-day window ending Oct. 18.
During the campaign period, Dune tallied $353 million in notional volume for Kalshi alongside $160 million for Polymarket. This study also isolated cash volumes of $147 million and $77 million respectively, separating these amounts from notional trades and open positions. Further examination revealed that 24,930 Polymarket wallets maintained midterm stakes with a median holding of $14. The leading 100 wallets represented 56% of total position value, though wallet tallies cannot confirm the number of distinct traders.
Dune's data covering activity through October 18 does not reflect current balances or confirm misconduct, as its published snapshot fails to establish that large positions, concentrated holdings, or price differences resulted from manipulation. In a separate enforcement matter, an August 28 CFTC settlement involving confidential government information required former White House teleprompter operator Gabriel Perez to return $107,539.02 in trading profits and pay a $65,000 civil penalty.
The regulator determined that Perez utilized advance access to presidential speeches to trade contracts based on specific words or phrases the president would utter, with the release dating his trading activity from December 2025 through February 2026. This conduct was found to breach a duty of trust and confidence.
Following a three-year prohibition on trading, Perez committed to halting any additional breaches of the Commodity Exchange Act and related agency rules. The regulator noted that his collaborative stance secured a significant reduction in penalties, while also acknowledging KalshiEX's role in aiding the probe.
On July 31, a distinct settlement addressed former Representative George Santos regarding his trading activities linked to his potential appearance at the 2026 State of the Union address. The agency determined that Santos executed trades while providing false or incomplete information on social platforms concerning his attendance intentions, with market prices shifting in ways that benefited his holdings. Consequently, he was directed to forfeit $17,569.98 in earnings and remit a $17,500 civil fine, alongside a three-year trading restriction and an agreement to prevent future infractions.
On September 22, CFTC staff released an advisory focusing on oversight of agreements linked to a specific individual's statements, presence, public engagements, or social exchanges. The guidance highlighted that resolving these contracts based on personal behavior may elevate the danger of market manipulation. As noted by the report earlier, this directive cautioned trading platforms regarding risks associated with mention contracts and urged the implementation of protective measures customized for each specific offering.
The commission's public notice reiterated Core Principle 3 to designated contract markets, mandating that they list solely those agreements which are not easily open to manipulation. Personnel within the agency requested thorough, product-specific examinations in filings submitted pursuant to Part 40 of the regulatory framework governing the commission.
On October 2, legal experts Jeff Le Riche and Kip Randall from Husch Blackwell issued an analysis stating that the advisory did not prohibit mention contracts entirely nor impose fresh legal duties. Their evaluation noted that exchanges offering or aiming to offer such products would encounter increased regulatory attention.
Market Volume and Holder Concentration Data
Legal representatives separated agreements driven by personal behavior from those resolving based on independently generated, externally verifiable results such as election outcomes and economic data releases. The CFTC has upheld its asserted jurisdiction over prediction markets via judicial documents. On May 12, the commission announced it filed an amicus brief in KalshiEx LLC v. Matthew T. Schuler before the U.S. Court of Appeals for the Sixth Circuit.
Before the U.S. Court of Appeals for the Sixth Circuit in Case No. 26-3196, the Commission contended that its federal regulatory structure overrides state statutes within CFTC-regulated markets and sought judicial correction of what the agency termed a too-constrained interpretation of its authority by the Ohio federal district court.