event.” 6 These contracts can be structured to offer either binary payouts 7 (i.e., winner take all) or variable payouts (i.e., the payout varies with a measured outcome). 8 For a binary payout event contract, upon the occurrence or non-occurrence of the contract event, the holder of either the long (“yes”) or short (“no”) position is paid the total fixed payout amount (e.g., $1) while the counterparty receives no payment. For example, Hypothetical DCM lists a binary payout event contract based on whether snowfall in New York City will exceed 8 inches on March 15, 2026. A participant buys a contract from another participant at the prevailing market price of $0.75. New York City receives 10 inches of snow on March 15, resulting in a payout of $1.00 to buyer (i.e., the holder of the “yes” contract) and no payout to the seller (i.e., to the holder of the “no” contract). For a variable payout event contract, the fixed total payout amount is distributed between the long and short positions. If the total payout amount is $1.00, then a variable payout outcome could include a payment to long position holders of $0.10 and a payment to short position holders of $0.90. For example, Hypothetical DCM lists a variable payout event contract based on the percentage of days New York City receives at least an inch of snowfall in January 2026: each contract has a total payout of $1.00 and at final settlement the payout to the buyer equals the percentage of days it snowed at least one inch in New York City during the month of January 2026, and the payout to the seller is the difference between $1.00 and the payout to the buyer. A participant buys a contract from another participant at the prevailing market price of $0.10. New York City receives at least an inch of snow on 7 of 31 days (approx. 23%), resulting in a payout of $0.23 to buyer (i.e., the holder of the “yes” contract) and $0.77 to the seller (i.e., to the holder of the “no” contract). Many event contracts are “commodity options” under CFTC Regulation 1.3. Commodity options are subject to regulation under CEA section 4c(b), which prohibits any person from transacting in commodity options “contrary to any rule, regulation, or order of the Commission prohibiting any such transaction or allowing any such transaction under such terms and conditions as the Commission shall prescribe.” 9 As the Request explains, options are also “swaps” under the CEA. The broad statutory definition of “swap” would also generally include any event contract that does not fall under the commodity option definition. Event contracts that reference a security would likely fall under the definition of “security-based swaps,” which are subject to the jurisdiction of the SEC. As an alternative to being regulated as a swap, the Request explains that event contracts may be certified for listing as futures contracts. Because futures contracts are excluded from the CEA definition of “swap,” such event contracts would not be considered swaps. 10 However, because
6 Id.; Event Contracts, 89 Fed. Reg. 48968, 48969 (Jun. 10, 2024).
7 As of the date of this OnPoint , certain exchanges have disclosed plans to list event contracts that have binary payment outcomes.
8 Certain exchanges have also disclosed plans to list event contracts with variable payout outcomes.
9 The CFTC’s plenary options authority provision in CEA section 4c(b) was added by the Commodity Futures Trading Commission Act of 1974 and was not amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) passed in 2010.
See CEA section 1a(47)(B).
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March 2026 / Page 4
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