Feds probe 'mention markets' amid White House Kalshi controversy

Federal regulators have opened an inquiry into so-called "mention markets" on prediction market sites, where people bet millions of dollars on what a speaker may or may not utter. Erin Hooley/AP Photo/Erin Hooley/AP hide caption

Federal regulators have launched a review of so-called "mention markets" on prediction market sites, where bettors wager millions of dollars on the word choice of everyone from President Trump to soccer sportscasters, according to two people with direct knowledge of the probe who spoke to NPR on the condition of anonymity because they were not authorized to speak publicly.

In response, Kalshi, the largest prediction market in the U.S., has removed all mention markets from its betting offerings for sports as the Commodity Futures Trading Commission pursues its inquiry, according to one of the people.

While most sports betting on the site involves the action of the game, this separate type of betting has grown increasingly popular, allowing people to put money down on whether a sportscaster will say things like "MVP," "ankle" or "redshirt." These markets have now been taken down "until further notice" and it is unclear when or if Kalshi will bring them back, the person said.

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Sports wagers account for more than 80% of the billions of dollars traded every week on the site, so taking down mention markets for sporting events will significantly cut into the category. Kalshi is still allowing wagers related to what people say at political events , on earnings calls and during live television newscasts .

The stepped-up scrutiny from Washington on one of the most controversial areas of the booming prediction market sector comes after a high-profile incident involving betting on a speaker's words reached the White House.

Last month, regulators revealed that President Trump's longtime teleprompter operator was using Kalshi to profit from correctly betting on what words the president would or would not utter during public appearances. Kalshi said its internal surveillance tools flagged the suspiciously well-timed bets and reported them to federal authorities.

"These mention markets are not popular across the political aisle," said the other person with knowledge of the probe who requested anonymity to discuss internal deliberations at the CFTC. "They are potentially very easy to manipulate, so the CFTC is taking a hard look at whether some of them make sense."

Spokespeople at Kalshi and the CFTC declined to comment.

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Polymarket, Kalshi's main competitor, also offers mention markets, but only on its popular overseas site, which is not regulated by the CFTC. Polymarket's smaller U.S. service does not list mention markets.

The vast majority of prediction markets are "self-certified," meaning the betting platform can launch a market as long as it files paperwork with federal officials saying the market is in accordance with rules for something known as a "swap," a type of financial derivative.

One of those rules requires that prediction market operators affirm that the market cannot be "readily susceptible to manipulation," inviting bad actors or insider traders to profit by rigging a market.

There is growing concern among Kalshi's lawyers and federal regulators that betting on certain kinds of speaking events runs against this principle, since the very nature of some markets attracts possible manipulators, according to the second person familiar with the CFTC probe and a former Kalshi employee who spoke to NPR on the condition of anonymity because they were not authorized to speak publicly for fear of retaliation.

Inside Kalshi, employees have debated the usefulness of mention markets, with Kalshi co-founder Luana Lopes Lara especially championing them, according to the former Kalshi staffer.

Lopes Lara views betting on the words people say at an awards show, a reality TV program or on an earnings call as a way to pull people into prediction markets from avenues other than sports. Sporting events are what most traders come to the site to wager on, yet the area has become incredibly litigious for the company, as it faces more than two dozen lawsuits from states and tribes over sports betting.

Betting on the literal words coming out of someone's mouth has led to preposterous outcomes.

During the live broadcast of the World Cup final on Fox, traders on Kalshi were placing millions of dollars of bets over who would attend .

When one of the Fox sportscasters mistook Matt Damon for Brad Pitt, several news organizations mistakenly reported that Pitt was there.

Some of those news outlets were what Kalshi calls "source agencies," or news organizations that help resolve its markets, or determine whether the event being bet on did or did not happen. After the Fox sportscaster misspoke, the Kalshi market settled on Pitt attending, strictly following its contract rules — even though the actor was not actually there.

Kalshi data shows that people who bet that Pitt was not there collectively lost $287,866.