Prediction market contracts that settle on whether a named individual says particular words, turns up somewhere, or interacts with someone else should be treated as presumptively open to manipulation, staff at the Commodity Futures Trading Commission's (CFTC) Division of Market Oversight said on Tuesday.

The presumption also covers contracts tied to attendance, handshakes, photographs, and social interactions — a category the industry calls "mention markets." Exchanges can rebut the presumption, but staff expect a heightened showing backed by detailed evidence of surveillance and controls.

Most event contracts settle on outcomes that nobody controls, such as economic data, election results, or sports results. In mention markets, by contrast, settlement turns on the discrete conduct of one named person — conduct that staff wrote may be "neither independently generated nor externally verifiable." The person at the center of the contract can often produce the outcome single-handedly, and outsiders may have no independent way to verify it.

The advisory cites the example of a contract on whether a podcast host uses a catchphrase: the host can simply say it, and a trader can induce the outcome by submitting a question or paying for an on-air mention. Those closest to the outcome often hold scripts, prepared remarks, or guest lists, which staff treat as material nonpublic information.

Under Core Principle 3, designated contract markets — the registered exchanges that list these products — must list only contracts that are not readily susceptible to manipulation. Staff said the presumption can be rebutted, and outlined the factors they will weigh: whether the individual faces legal or professional obligations that deter interference, whether they can be pressured by others, whether the conduct is independently verifiable and publicly scrutinized, and how robust the exchange's own surveillance is.

Among the measures staff suggested are restricted lists of participants with contract affiliations, third-party screening, pop-up warnings before trading, and position limits sized so that manipulation would cost more than it could earn. Read together, the suggestions sketch what an exchange would need to assemble to rebut the presumption in practice.

The advisory carries no legal force, representing the views of division staff rather than the Commission itself, and is signed by acting director Duncan Hennes. It follows the CFTC's settlement last month with Gabriel Perez, a former White House teleprompter operator who was fined $172,000 over trades on presidential mention contracts using speeches he had seen in advance — the same category of advance knowledge the advisory now treats as material nonpublic information.

The advisory also lands within a broader effort to define what event contracts may cover. In June, the Commission proposed a framework for judging whether a contract involves terrorism, assassination, war, gaming, or unlawful conduct, and would bar sports contracts settling on discrete player actions such as fouls or individual plays — reasoning that today's advisory cites directly. That framework has yet to be finalized.

Who regulates any of this remains contested. States have argued in a run of federal lawsuits that sports event contracts constitute unlicensed betting, and in April the Justice Department and the CFTC sued Illinois, Arizona, and Connecticut to assert the agency's exclusive authority. How that jurisdictional fight is resolved, whether the June framework is finalized, and whether any exchange can marshal the evidence to rebut the presumption are the questions that will set the boundaries for mention markets going forward.