they tend to track the probability of a discrete event occurring rather than a fluctuating value, the majority of event contracts have been certified as swaps rather than futures contracts. 11 Following the Dodd-Frank Act’s addition of the “swap” definition to the CEA, the CFTC adopted regulations that generally require commodity options to be transacted subject to the same laws and rules applicable to all other swaps. 12 Unlike more financially sophisticated eligible contract participants who can trade swaps on a bilateral, non-cleared basis, retail participants can legally only trade swaps, including event contracts, on a DCM. All transactions, including any contracts, executed on or through a DCM must be cleared with or through a DCO. Event contracts that are swaps may also be listed on a swap execution facility (“SEF”), but because only eligible contract participants may trade on SEFs, 13 more market participants can trade event contracts on DCMs than on SEFs.
The Request and the DMO Advisory
In the Request, the CFTC sets out the regulatory framework applicable to prediction markets and summarizes prior CFTC notices in this area. The CFTC also seeks comment on certain aspects of prediction market regulations, including the application and scope of the CFTC regulations applicable to prediction markets and insider trading considerations. The CFTC also asks for comment on the interaction between statutory core principles for DCMs and derivatives clearing organizations (“DCOs”) and prediction markets. The Core Principles are set out in sections 5(d), 5b(c)(2) and 5h of the Commodity Exchange Act (“CEA”) and establish standards for various CFTC- registered entities, including DCMs, DCOs and SEFs. These requests for comment indicate the issues the CFTC is focused on for future rulemaking. The CFTC also notes that it may use comments received in response to the Request to inform future actions in the space. The DMO Advisory is addressed to all DCMs and discusses the listing and trading of event contracts. In it, the DMO reminds DCMs of their obligations to: Ensure that listed event contracts are not readily susceptible to manipulation (DCM Core Principle 3); Prevent abusive trading practices through market surveillance and enforcement programs (DCM Core Principle 4); and
11 Lists of event contracts certified for listing as futures contracts and swap contracts are available on the CFTC’s web site. See https://www.cftc.gov/IndustryOversight/IndustryFilings/TradingOrganizationProducts?Organization=&Type=&Status= &Date_From=&Date_To=&Category=&Subcategory=&Show_All=0.
Parts 3, 32 and 33 of the CFTC’s regulations.
12
CEA section 5h.
13
March 2026 / Page 5
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