Many manipulative methods, particularly communications, are provisionally protected from putative claims of defamation, misrepresentation or fraud, when characterized as opinion. Such communications are frequently argued as immune from civil lawsuit or criminal enforcement under the First Amendment. Manipulators seldom issue overt false claims about an issuer, its prospects, management, suppliers, or customers. Instead, they orchestrate trades that trigger copycat activity, exploiting herd instincts and using subtle messages to nudge others to trade. Regardless of market, manipulative schemes share several key factors: manipulative intent, targeted assets, confusion in regulatory jurisdiction, trading that manipulates price or volume, reinforcing statements and inferences (increasingly including social media), trading losses suffered by direct counterparties and ultimately attenuation of market integrity.
Increasingly Linked Markets Risk the Spillover Effect
Many markets parallel other markets in pricing and volume, but some lack widespread visibility or influence. For example, stocks covary by frequently trading in parallel to their options, futures, warrants or derivatives. Securities typically share volatility within their issuers’ particular industries and supply chains. While covariance is seldom in strict lockstep, the ongoing proliferation of investment vehicles invites manipulation of these “correlates” for three reasons. First, trading in correlates may hide the manipulator’s actual targeted asset, thereby obfuscating remediation or enforcement forensics. Second, trading in correlates, while unlikely to covary perfectly, nevertheless can produce either diminished or magnified impact on the targeted asset. Third, manipulative trading in correlates reduces the forensic tip-off that most clearly identifies the target asset. Correlates are unlikely to be analyzed uniformly in investigations.
Correlate covariance illustrates spillover: trading in one asset ripples into correlated assets. Manipulators co-target these links, creating opaque layers that hamper enforcement and let contagion spread beyond the initial asset. Network-economics mapping pinpoints spillover paths and scale, spotlighting the resulting market-integrity risks. Parallel to the fluid innovations in structuring and layering money-laundering schemes, spillover prospects likely encourage novel and widely misunderstood intermediation architectures. In both domains, this obfuscates the strategic forensic adage: “follow the money.”
Correlative Manipulation: Spillover Effects Distort Capital Formation
Spillover to correlates is becoming pervasive. Manipulators exploit and create spillover opacity by layering cover between their correlate trades and the targeted asset. Technical financial analytics may enable forensic detection. Liquidity spirals are the essence of technical financial analytics. While liquidity spirals imply mostly downside/bearish pricing for both targeted assets and their correlates, they likely explain only half of manipulation volatility.
Liquidity is important to market integrity and efficiency, the favorite argument of speculators and their intermediary service providers. Continually confronting this liquidity justification, advocates that favor anti-manipulation strategies, models, assumptions and methods focus on the economic utility of curbing manipulation. Contagion fuels the volatility coveted by speculators and manipulators, who therefore target sectors where it is easily stoked — like technology and financial markets — while avoiding steadier industries — like utilities and consumer staples. Advanced forensic analytics aid in the detection of a manipulative scheme; experts apply statistical, network, and AI tools (heat maps, centrality scores, sector rankings, herding indices, reversal signals, and sentiment-dispersion metrics) to trace manipulation. Recall, manipulated prices and trading volume cascade to distort other important, dependent matters: securities valuations, merger-and-acquisition appraisals, executive compensation benchmarks, and various indenture trigger points.
Regulatory Action
Expect Erratic Regulatory Intensity
Regulatory intensity — seen in proliferating rules, advisories, and caseloads — drives compliance costs. Historically, market-manipulation enforcement leaned on robust oversight, but shifting administrative priorities may dampen that intensity just as new assets and trading tactics widen manipulators’ targets. Policymaking through ad hoc enforcement is now largely abandoned at the SEC, CFTC, and DOJ. Complicating matters, several major Supreme Court decisions have attenuated regulatory powers in expertise, venue, and rulemaking. Such developments could significantly hobble manipulation enforcement. Indeed, Executive Order No. 14,294 of May 9, 2025 clearly disfavors strict liability criminalization of regulatory offenses, directly impacting criminal referrals to DOJ.
Regulators are increasingly dismissing crypto enforcement actions, claiming the pause — pending regulatory or congressional overhaul of sui generis rules — “will facilitate the[ir] . . . ongoing efforts to reform and renew [their] regulatory approach to the crypto industry.”
Major structural market changes complicate investment supply chains, just as decentralized finance (DeFi) disintermediates financial services, sometimes simultaneously replacing legacy intermediaries with less transparent, offshore or misunderstood agents. DeFi and financial technology (FinTech) promise lower costs by ousting pricey legacy intermediaries and replacing them with online middlemen for expertise, recordkeeping, and custody. Yet mounting evidence shows this structure often heightens manipulation, inflates costs, and adds little-understood risks. Nevertheless, market manipulation enforcement appears to remain a major objective for some regulators.
Regulation of Manipulation by Asset Class
Several regulators oversee manipulation enforcement among the several asset classes actively traded in public markets. The SEC and SROs police manipulation of securities; the CFTC oversees commodities and, now, prediction markets; and the FRB and OCC regulate traditional currencies. The DOJ and CFPB both regulate certain asset classes. Some agencies — for example, the SEC, CFTC, FRB — are governed by multimember bodies and retain some degree of political independence, while other agencies are headed by individual cabinet-level appointees that acquiesce to the administration’s priorities. Cryptocurrencies currently occupy an uncertain regulatory wilderness pending successful efforts to create a sui generis regulatory regime.
Securities
Enforcement of securities manipulation (e.g., stocks, bonds, certain swaps and derivatives) is primarily enabled by Section 9 and Section 10(b) of the Securities Exchange Act of 1934 and SEC regulations promulgated thereunder, notably Rule 10b-5 and Regulation M. Section 17 of the Securities Act of 1933 may also be relevant in IPO manipulation cases. Congress empowered the SEC, the DOJ, and private plaintiffs to enforce various provisions of the securities laws against manipulators. Moreover, the SROs also prohibit manipulation. This survey year, the SEC brought about twenty manipulation enforcement cases in federal courts, with some cases likely originating from the SEC Whistleblower Program. Most cases involve equity securities and their derivatives, although bond manipulation, particularly manipulation involving government bonds, appears on the rise.
Is crypto a “security” — and, if so, must custodians, marketplaces, recordkeepers, and other intermediaries follow federal and state securities rules? Would manipulation cases then fall under federal jurisdiction by meeting the Howey test? Or, should crypto be considered a sui generis, new asset class, under some uncertain, developing regulatory scheme?
Early interpretations strongly suggested most crypto issuances, issuers, trading, intermediaries and ancillary service providers were largely subject to securities law. However, those early interpretations are subject to change, as crypto advocates gain sympathy in Congress, the administration, the SEC and some states. Nevertheless, securities regulation of manipulation provides strong analogies for crypto manipulation enforcement. Crypto holdings are proliferating quickly at commercial and investment banks, in portfolios of private equity, hedge funds, venture capital firms and exchange traded funds (ETF) and the so-called “crypto treasuries.”
Commodities
History.
Antebellum commodities markets burgeoned as production and supply chains were mechanized during the Industrial Revolution of the late nineteenth century. However, severe doubt was sewn throughout agriculture communities (particularly in the Midwest) that commodity market distortions and manipulations threatened their survival. Since then, the range and depth of commodities regulated by the CFTC under the Commodity Exchange Act (CEA) continues to grow beyond the financial products (futures, swaps, options) in the traditional commodities markets, namely agricultural, livestock, precious and industrial metals, building materials and currencies.
Recent Enforcement Action.
On June 17, 2024, the CFTC entered into a consent decree with Trafigura to resolve allegations that it traded gasoline based upon misappropriated information and that it manipulated a fuel oil benchmark to enhance its futures and swaps positions. Further, Trafigura pressured employees to sign NDAs barring voluntary disclosures of information, even to law enforcement agencies or regulators. Such practices violate the CFTC Whistleblower Program. The consent decree requires Trafigura to pay $55 million as a civil monetary penalty and to implement remedial measures to ensure future CEA compliance.
Prediction Markets
Increasingly, the CFTC claims jurisdiction over events contracts on prediction markets. For example, in KalshiEX LLC, the CFTC sought to regulate as commodities bets placed by the platform’s users on the occurrence of certain events, such as the outcomes of political elections. While intra-organizational markets and limited numbers of public prediction markets have existed for decades, “event contracts” trading on public markets is relatively novel. The CFTC defines “event contract” to mean a “derivative contract, typically with a binary payoff structure, based on the outcome of an underlying occurrence or event.” Gamification and gambling-like dynamics in today’s markets arguably undermine sound investing principles by fostering compulsive-trading and potentially exploiting tax rules that let investors offset traditional market gains with losses from prediction-market platforms. Prediction market proponents argue that prices on the platforms reflect collective intelligence, as well as the wisdom of crowds, given that mispricing attracts participants with superior information. However, prediction markets remain unstable, fostering public distrust, reflecting bias-driven distortions (e.g., hindsight, anchoring), and attracting so-called “dumb money” from under-informed traders. Furthermore, because prediction markets — like meme assets — lack intrinsic or lasting value and operate largely as popularity wagers, the CFTC prohibits contracts that bet on highly negative events it deems contrary to the public interest.
Crypto
This survey treats cryptocurrencies as a separate asset class, given erratic assertions of regulatory jurisdiction. The public does not consider crypto safe or reliable. Crypto markets typically experience volatility, thereby inviting manipulation. Regulators have pursued crypto manipulation civilly, and the DOJ has criminally prosecuted manipulators. Industry observers estimate that crypto crime (not limited to manipulation) might have exceeded $51 billion in 2024.
Observers recognize that an increase in scale of manipulative trades directly enhances manipulative schemes. Recent studies in crypto manipulation forensics find that large trades by crypto “whales” impact markets more profoundly than comparable aggregate trades by “minnows.” Of course, highly visible, larger scale transactions are known to exert greater influence than dispersed small trades, triggering disaggregate trading strategies by those who seek to dampen any such influence. Large trades, corners and squeeze conditions are well-recognized to move markets far more than smaller, isolated trades. Furthermore, opaque, off-exchange or unreported trades of almost any scale exert less influence than highly transparent trade reports.
Conclusion
This year’s events yield three clear insights. First, enforcement intensity — shaped by the tug-of-war between regulators and deregulatory forces — still determines deterrent effect. Second, new asset classes are proliferating and tend to face manipulation almost immediately as tactics evolve. Third, despite “RegLag,” agencies and their experts now wield an expanding suite of forensic tools that bolster enforcement, prosecutions, private suits, and may restore whistleblowers’ pivotal investigative role.
Manipulation thrives on whipsaw volatility. While disintermediation advocates tout transaction-cost reductions from outsourcing special expertise or independent fiduciary duties, legacy intermediaries are often merely replaced by new intermediaries, the latter with unknown costs and systemic risks. Dis- and re-intermediation remain in flux, bringing acute risks — catastrophic data loss, fresh cyber gaps, rash decisions, and weaker competition. Outsourcing, building in-house, or hiring specialists is ultimately a supply-chain choice that reshapes fiduciary, confidentiality, and public-service duties. Early-stage firms rely on intermediaries to route orders, clear trades, and supply data, yet those same actors can enable spoofing, wash-trading, and misinformation, amplifying systemic risk.
Experts identify unauditable transaction processing as the most foundational defect in AI, which facilitates laundering, market manipulation, and various fraud-induced market failures. Opacity remains the manipulator’s ally, enabling tax avoidance, deniability, trade-limit evasion, laundering, and other insider gains that impose social costs — underscoring the need for stronger regulation. Dark markets supply these covert benefits, letting parties make undervalued payments and then engineer bullish price spikes that enrich the payee at the public’s expense.
Legislators, agencies, and regulators must engage in rigorous trade-off analysis to properly balance sound governance and lasting growth. Transaction transparency and strengthened forensic tools directly address problems associated with (dis-)intermediation, and aid in achieving transaction-cost optimization, market (allocative) efficiency, and general fairness. Industry self-regulation might emerge to clarify manipulative behaviors, intermediary duties and fraud-related concerns.
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