CFTC staff advisory 26-08 flags single-actor settlement risk as Kalshi and Polymarket take bets on drug approvals

NPR reported that on Kalshi, users can currently bet on whether a weight-loss medication and a breast cancer treatment will be approved by federal regulators and on what date. Polymarket, NPR reported, is taking wagers on the approval of cancer treatments and on whether the United States will allow Chinese peptides to be sold to Americans; Polymarket declined to comment to NPR. NPR described the venues as "lightly regulated" prediction market sites.

The people NPR quoted objecting to the practice made a moral argument. There is a second argument sitting in the public record, written by the staff of the futures regulator, and it is about who can move a number.

What Kalshi says

Kalshi's case, as NPR summarized it, is informational: the prices are supposed to say something about which drugs advance, which the company says can help investors decide what to fund.

"If you want to ban profiting from the failure of clinical trials, you would start with the stock market, where the financial incentive for this type of profit is orders of magnitude larger," Kalshi spokesman Jack Such said, according to NPR, pointing to short sellers who have profited from trial failures. Such added: "While Kalshi and the stock market are the same in this regard, they do differ in one important way: the stock market doesn't give any valuable information to researchers."

Kalshi's own announcement of the pilot states: "Surfacing information is what Kalshi is for, and we are committed to doing it right: compliance-first, carefully scoped, and built for the long term." The same post sets out the safeguards. Kalshi and AppliedXL list a contract only after a trial finishes enrolling. The post states that "Kalshi will require employment verification for all traders in these markets" - future tense, in a pilot announcement. And the standing prohibition on trading by anyone holding material nonpublic information is said to apply here as in every other Kalshi market.

The post also gives the reason for restricting the pilot to late-stage trials: earlier-phase contracts, it says, involve exploratory endpoints and greater insider trading risk, while late-stage trials register their primary endpoints publicly, often after agreeing them with the FDA in advance, which the company says makes resolution unambiguous. NPR reported that Kalshi says it is offering bets on late-stage trials where participants have already been chosen and that it will not allow betting on markets where all trial subjects are minors, and that this could change.

NPR also reported that Kalshi has tapped its own experts, including 23andMe founder Anne Wojcicki, to vouch for the markets, and quoted a white paper sponsored by Kalshi calling an "open, transparent dataset about trial probabilities" promising for patients.

What the critics say

Joshua Pederson, a humanities professor at Boston University, told NPR: "What seemed to be missed in the CEO statements was the fact that there were going to be patients on the other side of these bets." NPR reported that Pederson asked that his son's name be withheld to discuss details of his medical condition.

David Tsai, who runs clinical trials at a biotech company in the San Francisco Bay Area, started an online petition to ban the practice, arguing that betting on drug trials "threatens the very foundation of trust and integrity in biotechnology." His stated concern is mechanical, and it is explicitly hypothetical. He described a trial of an oncology drug given by infusion, in which a pharmacist holding a bet "could obviously adjust the infusion rate, could adjust the source temperature of the drug." NPR reported that Tsai thinks it might not be easy to catch every bad actor in advance. No source reports that any such thing has happened.

Nicholas Zaorsky, a professor of radiation oncology at the Mayo Clinic in Jacksonville, Fla., who has helped run clinical trials, told NPR that clinical trials differ from other settings because "investigators, coordinators, and sometimes even participants can directly influence aspects of the outcomes being wagered on."

The record

Staff advisory 26-08, from the CFTC's Division of Market Oversight, restates the underlying duty: a designated contract market must list only derivative contracts that are "not readily susceptible to manipulation."

The advisory then explains when event contracts have satisfied that principle, and the answer turns on breadth. Such contracts have often been shown to be consistent with the principle, staff wrote, where settlement depends on "the aggregate performance of multiple participants over an extended period of play," because breadth reduces the ability of any single actor to move the settlement value without material cost or substantial risk of detection.

It names the inverse as well. Markets are encouraged to consider whether some categories carry a heightened potential for manipulation, and staff list, among sports examples, contracts that resolve or settle based on "the action of a single individual or a small group of individuals," such as officiating actions during a game.

For protection against manipulation and insider trading in that setting, the advisory tells markets to look to, "among other items, any league integrity standards or guidance around markets, contracts, and restricted or insider participants lists." The phrase "among other items" is in the original; the list is not a closed set.

Two further passages matter here. On cash settlement, which includes event contracts, staff wrote that the design can give a position holder a reason to try to influence the data behind the settlement price, or the computation of that price. On settlement sources, staff wrote that identifying the specific data sources and assessing their reliability, objectivity and manipulation resistance is expected, and that a contract resolving on a consensus of sources not determined in advance may not be enough. The advisory also reminds participants that Regulation 180.1 reaches misappropriation of confidential information in breach of a duty of trust, commonly called insider trading, and it describes designated contract markets as front-line regulators of the products they list. It notes that the Commission may stay the listing of a self-certified contract pending proceedings, including proceedings over a false certification of compliance with the manipulation standard.

A later advisory, 26-22, is about something else: filing practice. Staff there describe markets self-certifying broad template contracts that bundle permutations with differing settlement sources or methodologies under one certification, a practice that, in the document's words, "hampers DMO's ability to determine whether a DCM has supplied all information, explanation, and analysis required under Commission Regulation § 40.2." It records that notwithstanding 26-08, "many DCMs continue to self-certify event contracts pursuant to Broad Template Certifications," and states that staff may recommend a stay or require a certification to be withdrawn and refiled. The Commission's press release on that advisory stated that "broad, template-style certifications should not be submitted."

Both advisories state that they represent the views of the Division of Market Oversight only, and not necessarily those of the Commission.

Analysis: the same category, described twice

What follows is analysis grounded in the documents above.

Zaorsky's description of clinical research, and Tsai's hypothetical pharmacist, are descriptions of a structure the staff advisory already isolated: settlement that turns on the action of a single individual or a small group. The critics reached it through ethics; 26-08 reached it through manipulation risk, using a sports vocabulary. That correspondence appears in no single source.

The parallel stops at the remedies. What 26-08 offers for that category is institutional: among other items, league integrity standards or guidance around markets, contracts, and restricted or insider participants lists. Those presuppose a governing body that issues them. None of the documents here identifies any counterpart in clinical research - no body that publishes integrity standards for trading or maintains restricted participant lists. What the record does contain is Kalshi's stated substitute, employment verification the company says it will require, administered by the exchange itself.

There is a second distinction worth keeping straight, because the two are easy to blur. Kalshi's point that late-stage endpoints are registered publicly and agreed with the FDA in advance speaks to the settlement-source concern in 26-08: it makes the resolving number less ambiguous. It does not speak to the cash-settlement concern in the same document, which is about whether a position holder can influence the underlying data. A clearly defined measurement and a hard-to-influence measurement are different properties, and only the first is addressed by publishing the endpoint.

On regulation: NPR's "lightly regulated" is a fair shorthand, but the advisories describe something more specific. Products reach the market by the exchange's own certification, the exchange is treated as a front-line regulator of what it lists, and staff say in writing that the prevailing filing practice hampers their own review.

What the record does not show

None of these documents alleges that any trial has been manipulated, that anyone has traded these contracts on inside information, or that any market filed a false certification. Tsai's scenario is hypothetical on its face.

Neither advisory addresses Kalshi's biotech contracts. Both are directed at designated contract markets generally, both predate or postdate the pilot without naming it, and both state they are staff views only. Nothing here establishes what Kalshi's certification for these contracts contained, or whether it resembled the broad template filings 26-22 describes.

A prediction that can be checked

As of Dec. 31, 2026, I expect the CFTC's public press releases and staff letters to show no Commission order staying the listing of Kalshi's biotech event contracts. The basis is in the record: 26-08 describes the stay power as retained authority, 26-22 describes a stay as something staff may recommend, and neither document identifies these contracts. If such an order appears before that date, this reading was wrong.

Right of reply

Daily Pol has not independently contacted Kalshi, AppliedXL, Anne Wojcicki or the CFTC for this piece. The company statements quoted here are as published by NPR and in Kalshi's own announcement; NPR reported that Polymarket declined to comment. Any response received will be added to this article.