The U.S. Commodity Futures Trading Commission (CFTC) has issued a warning to prediction market platforms, reaffirming that event contracts linked to criminal activities are prohibited.

The warning specifically targets platforms like Kalshi, which recently offered contracts related to Luigi Mangione, the suspect in UnitedHealthcare CEO Brian Thompson's killing. These contracts included predictions about Mangione's extradition to New York, potential guilty plea, and whether he would claim to have acted alone.

Under CFTC Regulation 40.11, event contracts referencing terrorism, assassination, war, gaming, or any unlawful activities are banned as they are deemed "contrary to the public interest." While platforms can launch contracts without prior CFTC approval, the agency maintains the authority to pause or withdraw contracts that violate these regulations.

Kalshi promptly removed the Mangione-related contracts within 48 hours of their launch after receiving regulatory notice. However, offshore platforms like Polymarket, which operates outside CFTC jurisdiction, continue to offer similar contracts. One such contract on Polymarket, questioning the authenticity of Mangione's YouTube channel, has attracted over $441,000 in wagers.

This regulatory reminder comes despite recent federal court decisions allowing prediction markets to accept bets on the 2024 presidential election. Critics, including Better Markets' derivatives policy director Cantrell Dumas, argue these platforms essentially enable gambling on serious criminal matters.

The future of prediction markets' regulation may shift under a second Trump administration, as the president-elect has promised significant deregulation, pledging to eliminate ten federal regulations for each new one implemented.

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