Manipulative and/or false reporting activity is relatively unusual in markets on the control of Congress. It is more common in smaller scale, lower liquidity markets where there is less public, relevant information; more volatility; higher degrees of uncertainty; and short deadlines.

Insofar as these markets would be targeted for manipulation at all, we believe this would happen primarily through the dissemination of misleading news reports and polls. Given how quickly market participants themselves fact-check these sources, it would be difficult if not impossible for registered entities to address this type of manipulation more effectively than the markets.

The only scenario we can think of where manipulation would have a meaningful distorting impact on price forming information for the contracts would be on election day. In the event of a close election, when media reporting is unreliable and jittery traders are buying and selling in a state of panic, manipulators could cause major movements in the markets.

The easiest way a registered entity could address possible manipulation is by refusing to host discussion boards on their platforms. Comments sections have historically been among the most common vehicles for market manipulators to affect prices on PredictIt. The amount of activity in these comments sections makes it difficult for sites to police them.

This blog post is excerpted from our comment to the CFTC.