CFTC tightens prediction-market self-certification

The Commodity Futures Trading Commission on Friday issued a six-page advisory requiring prediction market operators to fully self-certify event contracts. The agency said template filings that reuse a single contract form while changing grading sources or settlement methods make oversight harder and limit market participants’ access to contract details.

The memo was drafted by Duncan Hennes, acting director of the CFTC’s Division of Market Oversight. It said staff have seen operators submit one template for multiple markets but swap data sources or settlement procedures across versions. The memo cited Commission Regulation 40.2 and the Commodity Exchange Act’s core principles as the standards used to evaluate whether each contract variation meets disclosure and market-integrity requirements. It instructs operators to disclose settlement methodology and data sources when they self-certify.

The advisory followed a House Agriculture Subcommittee hearing last week on prediction markets. Industry and gambling stakeholders debated whether federally regulated prediction markets should be allowed to self-certify sports or casino-style event contracts. Chris Cylke, vice president of government relations at the American Gaming Association, urged lawmakers to bar self-certification for gambling-style contracts, arguing federally regulated prediction markets lack the bettor-protection and match-integrity rules used by state-licensed sportsbooks.

Supporters of the existing self-certification process argued the CFTC has tools to act quickly. Carl Kennedy, co-chair of the financial markets and regulation practice at Katten Muchin Rosenman LLP, noted the agency can request a public interest review within 10 days of a contract listing. That review can last 90 days, during which the commission may block a contract that does not meet the public-interest standard.

Representative Nikki Budzinski asked whether self-certification filings give the agency enough information to identify contracts where a single player could influence the outcome. Robert Schwartz, a partner at Morgan Lewis and a former CFTC general counsel, referenced the commission’s proposed rules and a March memo, saying those documents expect comprehensive self-certifications that explain settlement and other risks and that a single-actor contract is unlikely to meet the public-interest threshold in the special rules.

The hearing also addressed agency resources. The CLARITY Act, a separate bill on digital assets, includes provisions that could help the CFTC expand its workforce. Schwartz said the agency’s staff levels have fallen roughly 20% since his departure in January and that additional resources could aid oversight.

The CFTC opened a public comment period on its proposed rules; stakeholders have until Monday to submit feedback. The advisory reiterates that each distinct contract offered on a designated contract market must be clearly described so staff can assess settlement risk and data integrity.