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Prediction markets gained immense popularity in 2025 – moving well beyond commodities and into elections, sports, and even central bank appointments.
Once niche hedging tools, they now attract mainstream attention and billions in trading volume.
Former CFTC enforcement director Ian McGinley told CNBC that “prediction markets have existed for decades,” but their rapid expansion this year has created new regulatory challenges.
With contracts tied to political outcomes and sporting events, the stakes are higher than ever, and the question is whether regulators have the resources to keep pace.
CFTC’s major challenge in regulating prediction markets
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McGinley underscored that the Commodity Futures Trading Commission (CFTC), which oversees prediction markets, is struggling with limited manpower.
“By some reports, the enforcement division, which I used to lead at CFTC, is under 100 people,” he said.
That small team is tasked with monitoring vast and growing markets, including sports-related contracts that now account for nearly 90% of prediction market volume.
Staffing cuts across government agencies have left the CFTC stretched thin, raising concerns about its ability to police misconduct effectively.
McGinley argued that “any new market that is being regulated, they’ll be learning,” but without more personnel, enforcement risks falling behind.
Insider trading risks loom large
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Critics argue that prediction markets are particularly vulnerable to insider trading.
Unlike traditional equities, where the SEC has built decades of enforcement precedent, prediction markets are newer and less fortified.
With contracts tied to events like elections or sports outcomes, individuals with privileged information could exploit markets more easily.
The relative lack of surveillance tools compared to stock markets compounds the risk. While McGinley insisted the CFTC “does have the ability to police these markets,” he conceded that staffing and resources remain critical weaknesses.
Without stronger oversight, these vulnerabilities could erode investor confidence and undermine the legitimacy of prediction markets as they expand in 2026.
Balancing innovation and regulation
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Despite these challenges, Ian McGinley sees prediction markets as part of a broader trend toward innovation.
He noted that after the Biden administration attempted to ban election-related contracts, the new US government embraced them as fitting its “pro-innovation, pro-growth” agenda that President Trump continued to tout to date.
That policy shift has allowed prediction markets to infiltrate “basically everything in our lives,” from politics to sports, the former CFTC director of enforcement said in the CNBC interview today.
The challenge for regulators in 2026 is striking a balance: encouraging innovation while ensuring markets remain fair and transparent.
As McGinley put it, “there needs to be more staffing” and more learning from both successes and failures.
Without that, prediction markets risk becoming fertile ground for abuse rather than a legitimate financial tool, undermining credibility and investor trust if oversight fails.