In February 2026, former Congressman George Santos bet on whether he would attend the State of the Union, then posted about his plans on social media while money rode on the answer.
Federal regulators later found those posts were misleading and that the contract's price moved in his favor after he made them.
With the November midterms already being called the first prediction-market election, knowing how these markets get gamed matters to anyone who trades them or simply reads their odds in the news.
Can Prediction Markets Be Manipulated?
Yes, prediction markets can be manipulated, and the Commodity Futures Trading Commission (CFTC), the federal agency that oversees regulated prediction markets in the U.S., has already punished traders for it.
A prediction market is a platform where you buy and sell contracts on yes-or-no questions about future events, such as whether the Federal Reserve, the U.S. central bank, will cut interest rates or which party will win the Senate.
Manipulation means deliberately distorting that market, either by pushing a contract's price away from what honest trading would produce or by rigging the real-world outcome the contract depends on.
Most attempts are expensive, traceable, and illegal on regulated U.S. exchanges, but they can succeed, especially in small markets and on questions a single person controls.
How Prediction Market Prices Work
Each contract, called an event contract, pays $1 if the event happens and nothing if it does not.
Its price, which moves between 1 cent and 99 cents as people trade, works as the crowd's estimate of the odds.
Imagine a contract asking whether it will snow in New York City on Christmas Day trades at 30 cents, meaning traders see about a 30% chance.
Buy 100 contracts for $30, and you collect $100 if it snows, a $70 profit.
If it stays dry, you lose the full $30.
That price is also public, and news outlets, campaigns, and investors increasingly quote these odds as if they were a live poll.
So anyone who can move the price can also shape what the public believes is likely to happen, which is exactly what makes manipulation tempting.
The Main Ways Prediction Markets Get Manipulated
Manipulation usually takes one of four forms, and each one exploits a different weak spot.
Pushing the Price With Big Trades
A trader with deep pockets buys huge amounts of one side to make an outcome look more likely than it is, often to sway news coverage or voter mood rather than to win the bet.
Researchers at Microsoft Research and Columbia University found that in the final two weeks of the 2012 presidential race, one trader on a now-defunct prediction market placed about a third of all bets on Mitt Romney and lost at least $4 million, yet the market still favored Barack Obama, who won.
Controlling the Outcome Itself
When one person decides how an event turns out, that person can bet on the result and then steer it, or mislead other traders about what they intend to do.
That is the conduct the CFTC found in the Santos case, and it ordered him to pay $35,000, including more than $17,500 in trading profits, though he settled without admitting or denying the findings.
Trading on Inside Information
Insider trading means betting on important, nonpublic information you obtained through a job or another position of trust, which does not change the outcome but leaves everyone on the other side of your trade at an unfair disadvantage.
In August 2026, the CFTC ordered a former White House teleprompter operator who saw presidential speeches before they were delivered to pay $172,539 for betting on words the president would say.
Faking Activity With Wash Trades
A wash trade happens when a trader, or a group working together, buys and sells the same contracts among themselves so a market looks busier than it really is.
Federal law bans the practice because fake volume can fool newcomers into thinking a market is more popular and easier to trade than it actually is.
Why Moving the Price Is Harder Than It Looks
A price pushed above the real odds creates a bargain for everyone else.
Suppose honest trading would put a candidate's chance of winning a Senate seat at 40 cents, but a manipulator buys enough "Yes" contracts to drive the price to 60 cents.
The "No" side now costs about 40 cents, and it pays $1 if the candidate loses, an outcome informed traders still think has a 60% chance.
Those traders expect each 40-cent "No" contract to be worth about 60 cents on average, so they keep buying, and the manipulator has to keep spending just to hold the price in place.
That is why the common belief that a wealthy trader can buy whatever odds they want mostly falls apart in large, active markets: the manipulator pays for every cent of distortion, and a higher price does nothing to change who actually wins.
The self-correction is weaker in small markets with few traders, where a modest sum can move the price, and it does not help at all when the person placing the bets controls the outcome.
Is Manipulating a Prediction Market Illegal?
On regulated U.S. exchanges, yes.
Event contracts count as derivatives, meaning financial contracts whose value depends on something else, so they fall under the Commodity Exchange Act, the federal law that bans manipulation and insider trading in these markets.
Exchanges the CFTC approves, called designated contract markets, must monitor trading, keep records, and enforce rules against prohibited practices, and they may list only contracts that are not readily susceptible to manipulation.
Many people assume insider trading rules stop at the stock market, but the CFTC's enforcement director rejected that idea in a 2026 speech, saying the agency will aggressively investigate and, where appropriate, prosecute insider trading in prediction markets.
Prosecutors are involved too: in April 2026, the Justice Department charged an Army special forces soldier with using classified details of the operation to capture Venezuelan leader Nicolás Maduro to win about $400,000 on prediction market bets, and he has pleaded not guilty.
Enforcement is still catching up to how fast these markets have grown, and platforms operating outside U.S. regulation do not offer the same surveillance or legal protections.
How to Protect Yourself When Trading Prediction Markets
You cannot remove the risk of trading against someone who knows more or is gaming the market, but a few habits lower it.
Stick to CFTC-Regulated Exchanges
Regulated exchanges watch for suspicious trading and refer it to authorities, which is how the Santos trades were first flagged.
If you want to try event contracts with those protections in place, Gemini offers prediction markets on a CFTC-regulated exchange through its affiliate Gemini Titan, which the agency approved as a designated contract market in December 2025.
Favor Markets With Heavy Trading
Liquidity, meaning how much money and how many traders are active in a market, makes a price harder to push around.
A contract with millions of dollars changing hands is far tougher to distort than one with a few thousand, so check the trading volume before you buy.
Be Cautious With Outcomes One Person Controls
Mention markets, which pay out based on whether a specific person says a certain word, shows up at an event, or interacts with someone, are the easiest to rig because a small circle of people knows or decides the result.
On September 22, 2026, CFTC staff warned that these contracts carry a heightened risk of manipulation and told exchanges to clear a higher bar before listing them.
Read the Settlement Rules First
Settlement is how an exchange decides the official outcome and pays winners, and every contract spells out the exact source and wording it will use.
Check those rules before you buy, since traders during this year's primaries disputed markets whose official rules did not match what the title seemed to promise.
