In an article examining the challenges facing the Commodity Futures Trading Commission (CFTC) as it seeks to regulate the rapidly growing prediction markets industry, Risk.net spoke with Partner and Co-Chair of Financial Markets and Regulation Carl Kennedy about the agency's recent efforts to curb market manipulation. He emphasized the significance of a recent CFTC staff advisory notice directing prediction market exchanges not to list contracts without safeguards against manipulation.
One flashpoint Carl highlighted is CFTC Regulation 40.11, a Dodd-Frank era provision known as the Special Rule, which contains a drafting error. The Special Rule created a process for the CFTC to determine whether event contracts within certain designated categories are against public policy. Carl explained that the regulation includes a drafting inconsistency with the statutory language in the Commodity Exchange Act added by Dodd-Frank. That inconsistency largely went unnoticed for years until the popularity of prediction markets brought it under scrutiny. "Hindsight is 20/20. Here we are, 15 years later, and it is the hottest topic. It's this rulemaking that had an error in the way that it was crafted, not [being] consistent with the statute and what Congress defined, and it's created all this confusion."
" Don't mention the rules: the fight against prediction market abuse," Risk.net April 16, 2026
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