At a prediction markets roundtable held by the Commodity Futures Trading Commission (CFTC) in Washington, D.C., the divide between traditional futures exchanges and emerging platforms was brought directly into focus. CME Group Chairman Terry Duffy and Kalshi co-founder Luana Lopes Lara engaged in a direct exchange, centering on risks of market manipulation, contract design, and whether regulatory standards are aligned.
CME questions the review standards
Duffy stated at the meeting that he is "very concerned" about prediction markets, noting that certain event contracts are more susceptible to manipulation. He specifically criticized some contracts offered by Kalshi and questioned whether such products have undergone the same level of scrutiny as those on established exchanges.
He also noted that Kalshi could list prediction contracts related to hashing power, while similar contracts proposed by CME are still under review, suggesting inconsistent regulatory standards. Duffy then sarcastically gave examples, stating that some contracts are inconsistent with the positioning of a serious financial market.
Kalshi struck back immediately
After being named, Lara responded on the spot, asking whether CME had ever been free of market manipulation in its history. She noted that risk is not unique to prediction markets—similar issues have occurred in traditional markets and both domestic and international exchanges—and that the role of regulation should be to identify and address problems, not to dismiss an entire market type based on them.
The two parties then escalated their rhetoric further. Duffy noted that the number of CME’s regulators exceeds the total number of employees at Kalshi; Lalla countered that perhaps this indicates the need to learn about efficiency. Duffy then reiterated that market credibility must come first, before the moderator stepped in to end the debate.
DraftKings CEO Jason Robins, speaking later, urged attendees to stop attacking each other’s business models, saying it does not help advance the discussion.
Federal and state government tug-of-war
Behind this dispute is a broader disagreement in the United States over which regulatory body should oversee prediction markets. Platforms like Kalshi and Polymarket allow users to trade event contracts on sports, elections, and other real-world events—and the central regulatory and legal controversy lies in whether these products should be classified as federally regulated derivatives or as gambling products governed by state law.
CFTC Chair Brian Quintenz previously publicly defended federal regulatory authority and warned state governments challenging that authority to "see you in court." Since then, the CFTC has taken legal action against states attempting to restrict event contracts under gambling laws.
In June, the CFTC proposed restricting certain contracts related to war, assassinations, and specific sports betting markets, citing that these products are more susceptible to manipulation. Earlier this month, nine Democratic senators urged the CFTC to ban wildfire event contracts, arguing that such products could incentivize arson, insider trading, and disaster profiteering.
Kalshi has recently been under pressure.
Kalshi has recently faced legal pressure in multiple states. Last week, a judge in Washington State ordered the company to cease offering contracts on sports, elections, politics, and other events within the state, ruling that its practices likely violate state gambling and consumer protection laws.
However, two days prior, the CFTC again ordered Kalshi to maintain trading in response to another dispute as New York State sought to block its related contracts, highlighting the ongoing clash between federal and state authorities over the same type of product.
As prediction market trading volumes grow and the range of covered topics expands, these platforms will face increased regulatory scrutiny. For traditional exchanges, the controversy is not just about competition, but also about whether event contracts can be included in a unified derivatives regulatory framework in the future.