Public comment letter filed with the U.S. Commodity Futures Trading Commission on 30 April 2026 in response to the Advance Notice of Proposed Rulemaking on Prediction Markets, 91 Fed. Reg. 12,516 (16 March 2026). Joint submission by Jonathan Russell and Elie Mishory.

Section 1. Introduction and Credentials

This letter responds to the Commission’s Advance Notice of Proposed Rulemaking on Prediction Markets (91 Fed. Reg. 12,516, 16 March 2026). It focuses on four issues raised in the ANPRM: whether prediction markets are especially susceptible to manipulation, how insider trading risk should be addressed, how to manage cross-market coordination, and what governance structure is needed for effective integrity monitoring of event contracts traded on Designated Contract Markets.

The authors bring complementary perspectives to the rulemaking process. Jonathan Russell is a Senior Integrity Advisor and a former Director of Betway Group, part of NYSE listed Super Group (SGHC), with thirty years of direct operational experience in regulated sports betting. He served as Global Head of Trading from 2013 to 2023 and as a board director across multiple Group entities until April 2024. He was elected to three consecutive terms as Non-Executive Chair of the International Betting Integrity Association (IBIA) from 2019 to 2025. In that role he worked directly with the International Olympic Committee, FIFA, UEFA, the FA, and the International Tennis Integrity Agency on integrity coordination protocols. He is currently practising independently as a Senior Integrity Advisor under BetTrust Solutions, having concluded his engagement with IC360 earlier in 2026.

Elie Mishory contributes legal and regulatory experience. He is the former Chief Regulatory Officer and General Counsel of Kalshi, the former Acting Associate Director of the CFTC’s Division of Market Oversight, former Special Counsel to a CFTC Commissioner, and former Senior Advisor to the SEC Chairman.

This letter is submitted in the context of the Division of Enforcement’s March 2026 statement at NYU Law School identifying insider trading in prediction markets as a priority enforcement area and confirming that Section 6(c)(1) and Regulation 180.1 apply with full force to event contracts traded on DCMs. It is also informed by Chairman Selig’s April 2026 testimony before the House Agriculture Committee, in which he stated that the Commission has hundreds of open investigations and a zero-tolerance policy on fraud, manipulation, and insider trading in prediction markets.

We address four of the ANPRM’s questions in depth: whether prediction markets are more susceptible to manipulation than other derivative markets; the specific challenges of cross-market manipulation; the governance model that should underpin and inform integrity monitoring obligations for DCMs; and how the Commission should draw the line between commercial monitoring vendors and independent integrity bodies.

Section 2. The Detection Problem

First-order obligation sits with exchange surveillance. The Commission has established that DCMs have an independent duty under Section 5(d) of the Commodity Exchange Act to maintain audit trails, conduct surveillance, and enforce rules against prohibited practices. The Division of Enforcement’s February 2026 Advisory (Release 9158-26) confirms that exchange-level surveillance is the primary mechanism for detecting prohibited practices, including insider trading, pre-arranged and wash trading, disruptive trading, and fraud. The Commission coordinates with DCMs on their enforcement dockets and receives referrals of potential violations for investigation. That model works well for cases where the trading activity, the event, and the actors involved all fall within the Commission’s direct jurisdiction.

The two enforcement cases discussed in the February 2026 Advisory show this model operating as intended. A political candidate trading on his own candidacy on Kalshi, and a YouTube channel editor trading on advance knowledge of channel content, were both identified through operator-level surveillance of anomalous trading activity. Both cases involved US-based actors and domestically generated events and were resolved through standard coordination between the operator’s enforcement docket and the Division of Enforcement.

What exchange-level surveillance can and cannot resolve. The patterns that DCMs monitor for include anomalous price movements, unusual concentrations of volume, timing clusters relative to external events, and trading behaviour consistent with advance access to non-public information. These patterns are visible in trading data alone. Once an anomaly has been identified, the next question is whether the pattern lines up with an event-side integrity issue, a particular holder of non-public information, or some other series of factual events that makes the anomaly explainable.

The exchange holds the trading data. It does not hold the event-side context. That context sits with the event organiser, the regulator or governing body for the event, any integrity monitoring organisation covering the sport or category, or any law enforcement or other authority investigating the event.

In her September 2025 farewell remarks at the Brookings Institution, Commissioner Kristin Johnson observed that the Commission had “too few guardrails and too little visibility into the prediction market landscape.” That concern came before the significant expansion of prediction market activity and the Commission’s more recent enforcement commitments under Chairman Selig. The practical question this letter addresses is how those enforcement commitments can be translated into ongoing supervision at the scale and global reach at which these markets now operate.

The taxonomy of information advantage. When a trading anomaly is identified, the key question is not simply whether the trader possessed material non-public information. As one of the authors has set out in recent work on information asymmetry in prediction markets, a trader’s information advantage generally falls into one of three categories: information the trader owns, information obtained through a relationship, or information generated through independent research or analysis. The legal consequences differ across these categories. The misappropriation theory applied in Section 6(c)(1) and Regulation 180.1 cases speaks directly to the first two. The third category, where the trader has developed an edge through legitimate work, does not fall within the prohibition. Distinguishing between the categories requires investigative inputs that trading surveillance alone cannot supply. The exchange sees the trade; but it does not see how the information was obtained.

The taxonomy as disciplinary framework. The taxonomy is not only a way to classify information advantage. It also maps onto who must disclose what, and under which obligations. No external investigator can tell whether a trader’s edge is owned, relationship-based, or skill-derived without information that only the trader, an employer, or the source of the information holds. In practice this means that a self-reporting framework has to be built around the taxonomy if it is to be usable. Experience in regulated betting shows that purely voluntary self-reporting to an industry body does not reliably surface these facts. To make the taxonomy operative, reporting obligations need to be tied to federal registration conditions for DCMs and to the conduct rules that apply to traders and information holders. The governance arrangements outlined in the next section are intended to provide a working model for that channel.

Empirical confirmation of manipulation susceptibility. Experimental evidence published by economists at Sciences Po and the Paris School of Economics shows that prediction market prices can be persistently moved through trading activity alone. In a pre-registered large-scale field experiment across 817 separate prediction markets, Rasooly and Rozzi (2025) placed randomised 5 percentage point price shocks and tracked the consequences through approximately 600,000 hourly price observations. The effects of the manipulations were still measurable 60 days after the original trades. Partial reversion occurred as subsequent traders responded to the price shift, but reversion was incomplete. Manipulability varied systematically with market characteristics: markets with more traders, greater trading volume, and external sources of probability estimates were harder to manipulate. Markets that lack these features are more exposed to manipulation. One of the authors has directly observed this same dynamic in regulated sports betting markets, most notably in next manager of club markets, where information asymmetry is pronounced and liquidity is directly connected to rumour and hearsay. Participants deliberately place bets at particular price points to create price movements that ripple across exchanges, enabling advantageous cashout of positions held elsewhere. This finding is material to the Commission’s evaluation under CEA Section 5c(c)(5)(C). The categories of event contract that warrant the closest public-interest scrutiny are, on this evidence, the categories that appear most manipulable.

Section 3. The Governance Model

Two-layer structure. We propose a two-layer structure that is consistent with the Commission’s existing approach.

Layer 1 is operator-level compliance. Each CFTC-regulated DCM maintains trading surveillance and enforcement capabilities under Core Principles 3, 4, and 12, identifies anomalous trading activity, investigates within its own enforcement docket, and refers appropriate potential violations to the Division of Enforcement. This is the model described in the DMO Advisory of 12 March 2026 and the Enforcement Advisory of 25 February 2026. We support that model and do not suggest any change to these first-order obligations.

Layer 2 is cross-operator governance infrastructure. Every DCM would be required to belong to an independent integrity body created by federal rule. The body would be operator-governed and operator-funded, with independently appointed leadership. Its role would be investigative and coordinative rather than primary surveillance. It would handle cross-operator identity resolution when anomalous trading spans multiple DCMs and would manage cross-border alert routing between DCMs, foreign regulators, sports bodies, law enforcement, and integrity monitoring organisations. It would be the standing channel through which external integrity signals reach US-regulated DCMs for investigation, and through which DCM investigations reach external bodies for event-side verification. A single coordinated channel prevents the duplicated and inconsistent reporting that arises when multiple entities route similar information independently.

The two layers work together. Layer 2 does not alter or dilute the obligation of each exchange to surveil its own trading activity. It supplies the investigative and coordination capacity that Layer 1 needs in cases where the relevant context lies outside the exchange’s field of view.

The voluntary ceiling. Voluntary industry body membership, which is the current model for integrity coordination in regulated sports betting globally, has been consistently under-enforced in practice when measured against what a federal regulatory regime requires. Self-reporting to a voluntary body depends on operator judgement about what warrants reporting and on operator willingness to share customer information across competitive boundaries. These constraints are not theoretical. They are visible in the existing regulated betting market, where voluntary coordination has developed substantial capability but remains limited by how much operators are prepared to share without a legal obligation.

A federal mandate would address this constraint. Making membership in the independent body a condition of DCM registration would create standing obligations to share identified alerts, cooperate with investigations, and take part in cross-jurisdictional information flows. The AGCO Ontario regulatory model for sports betting operators, which requires compulsory membership of an independent integrity monitoring body as a condition of market access, is a directly relevant precedent. We suggest that the Commission adopt an equivalent approach for prediction market DCMs.

IBIA as reference model. The International Betting Integrity Association has operated an equivalent form of governance infrastructure for regulated sports betting operators globally since 2005. Its members cover more than forty licensed jurisdictions. It processes suspicious activity alerts across all major sports. It coordinates with the International Olympic Committee, FIFA, UEFA, the International Tennis Integrity Agency, and national regulatory bodies across Europe, Asia, Africa, the Americas, and Oceania. It has developed alert protocols, data sharing agreements, and investigative coordination mechanisms with law enforcement authorities in multiple jurisdictions globally.

IBIA offers a concrete reference point for the type of structure we have in mind. Its governance arrangements, funding model, investigative coordination protocols, and long operating history show that the kind of integrity body needed here is already tested at international scale. It has been built and refined in the context of regulated sports betting on a global basis. We cite IBIA only as an architectural precedent. IBIA operates within its own scope and jurisdictions, and we take no position on whether any particular existing body should be designated or expanded to cover US prediction markets. That is for the Commission to determine in consultation with stakeholders.

Commercial integrity monitoring and compliance services and federal governance. We recognise that commercial integrity monitoring and compliance providers perform important work at the operator-compliance layer. They supply surveillance, prohibited-bettor screening, and internal compliance tools that support operator obligations under Core Principles 3, 4, and 12. That work is necessary and skilled and clearly belongs in Layer 1.

A commercial firm with multiple revenue-generating contracts across leagues, operators, and adjacent markets is, by design, not set up to perform the independent governance role that whole-market integrity requires, especially where that same firm owns the commercial data rights provision for the self-same leagues it is mandated to monitor. There clearly needs to be a separation of provision, investigative and procedural powers here. The limitation flows from the business model itself. It is also necessary to point out that cross-border data sharing under GDPR, for example, requires a level of certified compliance and independence that operator-facing commercial services are not structured to meet. This is a structural point about the difference between commercial compliance services and independent governance infrastructure, not a criticism of any particular provider, who may provide important services to the operators.

The two layers are complementary, not interchangeable. Commercial integrity monitoring and compliance services serve Layer 1. Independent governance infrastructure operates at Layer 2. The Commission’s rules should recognise both, while ensuring that the federal mandate for independent governance rests with an entity properly equipped to carry it out.

Section 4. The Cross-Border Coordination Problem

The empirical reality of international scope. Section 2 explained that exchange-level trading surveillance is the primary detection mechanism and that event-side integrity signals provide the investigative context that makes a trading anomaly interpretable. This section addresses the problem that arises when that event-side context sits outside the US federal regulatory perimeter, which in practice is the majority of the time.

The International Betting Integrity Association’s Q1 2026 Integrity Report records 70 suspicious alerts distributed as follows: Europe 28%, Global 21%, North America 20%, Asia 13%, Africa 9%, South America 9%, with an additional 15 eSports alerts that cannot be geographically attributed because the competitions are transnational. Approximately 80% of integrity alerts originate outside North America. This will be consistent with sportsbooks globally, regardless of domain where they reside or primary market they serve.

The events that drive prediction market volume on US-regulated DCMs are substantially the same events these alerts reference. Soccer, tennis, cricket and esports are among the largest categories of event contracts listed, and they are globally structured competitions played predominantly outside the United States. The integrity signals that would identify manipulation or insider trading in these competitions originate overwhelmingly outside the US federal regulatory perimeter. As the ACGS (Association of Certified Gaming Compliance Specialists) noted on 16 November, the globalisation of data and betting markets means even a low-profile match in a remote location can be wagered on worldwide, making it a viable target for someone looking to rig the outcome.

Chairman Selig has publicly acknowledged that the Commission is investigating trading activity preceding US-Iran ceasefire negotiations, the Venezuela operation, and tariff decisions, among other instances. These are international events. The investigative context required to resolve cases of this type depends on coordination with foreign governments, intelligence services, diplomatic authorities, and multilateral bodies that currently have no standing mechanism to engage with the Commission or its regulated DCMs. These are the same events that will feature across DCMs.

The bilateral MOU limitation. The Commission has signed a Memorandum of Understanding with Major League Baseball to provide for cooperation and information sharing. That is a coherent first step on its own terms. Even if extended to every major US league, that model would cover only a small part of the coordination actually required. Bilateral arrangements are not flawed in principle. Indeed they are to be actively pursued at a grand scale. They simply do not scale to the number and variety of relationships the Commission needs to manage.

This is analogous to a food-safety regime that inspects domestic production but allows imports in without checks. Such a regime is not useless. It is mis-matched to the risk profile it is supposed to address.

Bidirectional coordination. The coordination problem runs in both directions. An exchange that identifies a suspicious trading pattern on an event taking place outside the United States needs a mechanism to obtain event-side context from the relevant external body. Equally, external bodies investigating integrity issues on events with US DCM exposure need a way to reach the relevant exchange to investigate US-based customer activity.

The two directions operate differently. When an external body has identified a known event-integrity issue and needs to ask whether a specific individual or group traded on it, the exchange and its associated FCM or intermediary layer hold the identity data required to answer the question. This direction is relatively straightforward once the coordination mechanism exists. The reverse direction, where an exchange has identified a suspicious trading pattern and needs external event-side context to interpret it, is more demanding because the relevant context is spread across multiple external bodies in multiple jurisdictions under multiple legal frameworks.

In practice, most integrity alerts in regulated sports betting originate outside the receiving operator’s own surveillance and arrive inbound, requiring investigation of customer activity against an external indicator. Spotting the signal is not the difficult part. Coordinating an effective response across the different authorities, governing bodies, legal entities, and coordinating organisations that integrity alerts must pass through is the most complex element of the process. A single alert on an international match typically routes simultaneously to the relevant national gaming regulator, the national sports federation, the confederation governing the competition, the international governing body, prosecutorial authorities where criminal conduct is suspected, and foreign gaming regulators in the jurisdictions of other operators with exposure. Each recipient receives the alert under a distinct legal basis with distinct data access permissions and distinct reporting obligations. A US-regulated DCM with exposure to the same match currently has no standing mechanism to receive, verify, or act on such alerts.

The commercial dynamics observation. Recent analysis of 1.4 million Polymarket users and 20 billion dollars of volume finds that 84 percent of trading gains accrue to the top 1 percent of accounts, with market-making activity as the dominant predictor of positive performance (Akey, Grégoire, Harvie, and Martineau, 2026). This is the pattern Betfair recognised and addressed through the Premium Charge in 2008 after observing the same dynamic in its own market. Operator-level design identified and responded to the problem. Federal-level oversight currently cannot observe it. The Commission’s public-interest evaluation under CEA Section 5c(c)(5)(C) depends on visibility into the commercial dynamics of prediction markets. The governance structure we propose would give the Commission access to the operational data required for that evaluation, without requiring the Commission to build the analytical capability itself.

Section 5. Recommendations

We recommend that the Commission’s rulemaking address four specific elements in building an integrity framework for prediction markets.

First, the Commission should state clearly that exchange-level trading surveillance under Core Principles 3, 4, and 12 remains the first-order obligation for DCMs, consistent with the Division of Market Oversight’s Advisory of 12 March 2026 and the Division of Enforcement’s Advisory of 25 February 2026. The governance arrangements we outline are an extension of that model, not a substitute for it.

Second, the Commission should establish a mandatory integrity monitoring framework that requires all prediction market DCMs to be members in good standing of an independent, operator-governed integrity body. The body should be structured to handle cross-operator identity resolution, cross-jurisdictional alert routing, and bidirectional coordination with external integrity infrastructure. The AGCO Ontario regulatory precedent shows that compulsory membership of such a body can function as a registration condition for regulated operators. The cost of compulsory membership of an independent integrity body is modest relative to the enforcement resources it would unlock for the Commission and the reduction in operator-level investigative burden it would achieve through shared coordination infrastructure.

Third, the Commission should recognise the structural difference between commercial compliance services and independent governance infrastructure. Commercial services provide valuable functions at the operator-compliance layer. The federal mandate for independent governance should sit with an entity that is structurally suited to performing that function, with certified cross-border data handling capability, independent appointment processes, and no commercial revenue exposure to the operators, leagues, or event organisers it monitors.

Fourth, before any cross-market surveillance framework is mandated, the Commission should address four specific requirements: the legal basis for cross-market data sharing under applicable data protection regimes; the governance structure controlling data access and retention; the jurisdictional rules that determine which regulator receives which alerts; and the competitive safeguards that prevent operator data from being accessible to direct commercial competitors. The body proposed in this letter should be designed with these requirements built into its founding governance documents.

Conclusion

We offer this letter in support of the Commission’s commitment to robust enforcement against fraud, manipulation, and insider trading in prediction markets. The structure we describe extends the Commission’s current approach to match the scale and international reach of the markets it now oversees. It builds on integrity coordination mechanisms developed over two decades in adjacent disciplines such as regulated sports betting and draws on both operational experience and the legal framework of the Commodity Exchange Act. Our aim is to give the Commission a concrete institutional mechanism through which its enforcement commitments can be carried out in practice.

We appreciate the opportunity to contribute to the rulemaking process and would be pleased to answer questions or provide further detail at the Commission’s request.

Respectfully submitted,
Jonathan Russell
Elie Mishory