Prediction markets have moved decisively from novelty to mainstream infrastructure, attracting new participants, new contract types and new regulatory scrutiny. As the industry prepares to gather in just a few short days at Eventus’ FORWARD conference in New York City, it arrives at a pivotal moment: the contract self-certification model is under pressure, surveillance frameworks are still being defined, and the political risk of substandard regulatory design have rarely felt more acute.
To take stock of where things stand, Eventus Global Head of Regulatory Affairs Joe Schifano sat down with two guests who have seen this terrain from multiple vantage points:
- Summer Mersinger, CEO of the Blockchain Association and former CFTC Commissioner, bringing a regulator-turned-advocate perspective to some of the thorniest questions in the space.
- Dorothy DeWitt, Founder and CEO of Tölt Strategies and former Director of the CFTC’s Division of Market Oversight (DMO), whose ongoing work with emerging exchanges and clearing houses keeps her at the center of how these markets are being built.
The conversation covered self-certification design, surveillance calibration, the shift to disintermediated market structures, and the political and congressional dynamics that could reshape the industry’s future — including what happens if the industry overreaches.
Self-certification was designed for markets that move on a different timeline than prediction markets. The question isn’t whether to keep it — it’s how to make it credible when hundreds of contracts can list and resolve in a single day.
Joe Schifano: As these prediction markets scale and increasingly touch real-world and politically sensitive events, do you think the current self-certification model remains sufficient — or have we reached a point where it’s strained?
Summer Mersinger: It’s a tough question, and I know it’s something the CFTC is actively looking at. With these markets, you almost need self-certification because contracts cycle through so quickly. If there was a long, drawn-out process, they’d miss out on a number of events. So, how do you balance the need to quickly list contracts against making sure you have integrity? I think it’ll be difficult for the CFTC to thread this needle. I can see the need for some different questions to be asked about these contracts than for futures and other self-certified products. But ultimately, you can’t step away from self-certification for markets that move this fast.
Dorothy DeWitt: Every contract — whether it’s the oldest crude contract that’s been around forever or the newest short-term event contract — carries the same DCM obligation: the listing exchange must demonstrate to the CFTC certain economic concepts, including that the contract isn’t readily susceptible to manipulation. If you go back 20 years and look at how CME or Cboe approached self-certifications, they made significant portions of those economic analyses available to the public, on the basis that market participants need such information (akin to terms and conditions) to know whether and how to trade in the contracts. The industry would be well served by that kind of transparency today. Regardless of whether some or all of the economic analyses remain proprietary and protected from public view by FOIA, the CFTC sees all of those analyses and can push back when a self-cert submission isn’t sufficiently convincing, asking for additional analysis. When you’re having thousands of contracts self-certified in a day, that’s challenging. The CFTC can stay a contract that doesn’t meet the requirements at any time before, during, or long after it’s first listed, and staying a contract is distinct from enforcement activity. Some additional emphasis and clarity, perhaps in the form of making public the economic analyses around readily susceptible to manipulation for event contracts, could go a long way in ensuring market integrity while abiding by Chair Selig’s eschewal of regulation by enforcement.
Schifano: The Commission seems to be trying to allow these new markets to innovate and let principles do the work. At some point, though, a line may have to be drawn relative to contract types. Do you think the CFTC will do that — and is it the right path?
Mersinger: Chairman Selig has been clear: the CFTC is not a merits-based regulator. They’re not going to say “this is a bad contract.” But there’s a lot of room for additional clarity, especially around the definition of insider trading. The CFTC’s existing framework doesn’t neatly map to what people call insider trading in prediction markets. If you find out your neighbor is joining a sports team and you trade on it, there’s no duty to keep that confidential. That’s a different category entirely. There are guardrails the Commission could and probably should provide.
Surveillance in prediction markets faces a challenge that is simultaneously technical and conceptual — the tools may be ready, but what they’re supposed to catch is still being defined.
Schifano: There are real structural challenges here: thin liquidity, fragmented data, symbology problems that make similar contracts across DCMs hard to track. Are we at risk of setting surveillance expectations — for the market and the regulator — that can’t actually be met?
Mersinger: From my point of view, surveillance technology is moving as fast as the markets themselves. But the calibration question is harder. For sports contracts, you can work with leagues to identify who probably shouldn’t be trading certain outcomes. For other contract types, the question of what you’re even surveilling for is tougher to answer without more regulatory guidance. The tech exists — it’s the parameters that need to catch up.
Schifano: We (Eventus) have a lot to say about this from our own experience. We’re not going to detect insider trading in prediction markets the way we do in equities markets. There’s a lot more pattern-and-practice involved — for example – looking for unusual price spikes and asking whether certain accounts are consistently positioned around them. This can be difficult since even normal price movement around a sporting event can look unusual. We’ll iterate and pivot, but it starts with accepting that the playbook will look different here.
DeWitt: Most prediction markets registered or pending registration with the CFTC are disintermediated or hybrid models, meaning that retail can trade directly on the exchange without going through a broker-dealer-type of intermediary (an FCM). As a result, the roles and responsibilities of the exchange and clearinghouse differ significantly from traditional intermediated markets. In intermediated markets, both the exchange and FCMs surveille; in disintermediated markets, only the exchange surveils the markets. In intermediated markets, the FCM performs KYC and AML functions, the latter of which we see performed by clearinghouses in disintermediated contexts. The most effective surveillance will need to draw on sources outside the order book: KYC data, ongoing identity monitoring, and transaction patterns. Someone who wasn’t married to a professional athlete a few years ago but is now — that changes their risk profile. Higher AML risk can inform higher surveillance risk and vice versa. There’s a lot of work to be done connecting those data streams, and that’s genuinely exciting territory.
The emergence of the “superapp” model — prediction markets alongside 24/7 trading, tokenization and AI — raises deeper questions about where the risks concentrate and who is responsible for them.
Schifano: At our FORWARD conference in NYC this week, we’re primarily talking about prediction markets, but an overarching theme is how developments in AI, 24/7 markets, tokenization and prediction markets converge. Where do you see the greatest potential points of failure as this ecosystem comes together?
Mersinger: The failures that occur are typically not the ones regulators anticipated. Contract design is already an area of risk — we’ve seen disputes play out over whether an event is resolved as participants expected. And while these contracts are individually small, there’s significant aggregate volume. Regulators need to keep a close eye on where money is going, who’s holding it and how it’s being custodied.
DeWitt: There are a dozen DCM applications and more than half a dozen DCO applications pending. That’s exciting — a lot of competition, interesting products, and genuine innovation. But when a significant portion of the market activity is relatively new, operational integrity becomes a real variable. CME has worked for decades to ensure its systems don’t break, and even they have experienced recent outages. As new exchanges and clearing houses launch simultaneously, the CFTC will be watching for systemic hiccups, or worse. Being designated isn’t the finish line, it’s the starting line — and 24/7 trading makes that even more complex to manage. We work with registrants to help ensure seamless launches.
Schifano: Chairman Selig and Enforcement Director Miller have expressed confidence that the CFTC has the resources to manage this wave of new registrants. Others have expressed skepticism. Is the staff capacity concern real?
Mersinger: I always say to never underestimate the CFTC staff. Think about when the agency took over swap market jurisdiction — the expectation was a huge budget expansion to handle this. Congress cut the budget instead, and they still got the rulemaking done. They’re primed to see new innovative markets and adapt accordingly. That’s historically been one of their core competencies — keeping the trains running when they don’t have the resources of a larger agency.
DeWitt: I’d add that while the registrants may be new, the markets themselves aren’t new to CFTC staff. Kalshi was designated in 2020. The staff worked intensively as those markets grew and learned to manage hyperbolic growth in this space. That institutional knowledge remains sharp.
Prediction markets may have survived their first wave of jurisdictional challenges. Whether they survive the next depends as much on political judgment as legal architecture.
Schifano: What’s the single area where you see the greatest risk of something going wrong as these markets continue to evolve?
Mersinger: It’s less financial risk and more political risk. Some of the contracts that have been listed — around terrorism, war, assassination — are the ones Congress has already flagged. There’s bipartisan willingness to act if the industry doesn’t self-regulate around the contracts that are genuinely problematic. Congress isn’t looking to rewrite Dodd-Frank, but they’ll have no problem moving to shut down contracts they deem unacceptable. And that risk doesn’t go away after a midterm election. If anything, some of these concerns have bipartisan support regardless of who’s in the majority.
DeWitt: Innovative companies need to be mindful of whether they’re providing ammunition to have their industry reshaped through new legislation. There are genuinely important use cases for prediction markets — we talked about some of them today — and there are others that are more easily critiqued. The boundary between those categories matters. When the more questionable contracts get public attention, they create a stage for Congress to act, and potential legislative changes can gain traction in ways that sweep up the legitimate use cases along with the more controversial ones.
Mersinger: It’s also going to be legally interesting to watch. I believe the CFTC has jurisdiction here — these are markets, not sportsbooks, and Congress has defined these instruments as swaps. But you have to win in the court of public opinion and before Congress, too. The agency can prevail in litigation and still see its jurisdiction legislated away if the industry loses the broader argument.
Our thanks to Summer Mersinger and Dorothy DeWitt for their time and perspective. The prediction markets conversation continues this week at Eventus’ FORWARD conference on April 23 in New York City, bringing together market operators, regulators and infrastructure providers to explore where market innovation and market integrity intersect. For additional commentary and resources from Eventus on prediction markets and product evolution, explore our blog or request a demo.