CFTC warns prediction markets on template self-certifications
On July 24 the CFTC warned prediction market operators to stop submitting broad, template-style self-certifications and to provide full terms and a concise compliance analysis.
The Commodity Futures Trading Commission on July 24 issued an advisory directing prediction market operators to stop submitting broad, template-style self-certifications and to provide the full terms and a concise compliance analysis for each event contract permutation.
The agency said platforms may still self-certify contracts without prior commission approval, but only within the statutory self-certification framework. The advisory identified several instances where platforms “self-certified” event contracts without supplying “the terms and conditions of each proposed permutation and a concise explanation and analysis with respect to the product’s terms and conditions, the underlying commodity, and the product’s compliance.”
The CFTC reiterated that “broad, template-style certifications should not be submitted,” echoing guidance the agency issued on March 12.
The advisory was issued ahead of a July 27 deadline for public comments on proposed rule amendments that would clarify how the agency makes public interest determinations for certain event contracts. The proposed amendments lay out a three-step analytical framework to assess whether particular contracts are contrary to the public interest, including evaluation of contracts tied to activities enumerated in the Commodity Exchange Act such as terrorism, assassination and gaming.
In June, the law firm Ropes & Gray wrote that the proposed rule, if adopted, would reshape parts of the regulatory landscape for prediction markets.
The advisory instructs operators to include precise terms and conditions for every contract permutation and a concise legal and compliance analysis when using self-certification. The agency said recent submissions were overly generalized and did not explain how each contract’s terms, underlying commodity and compliance analysis met legal standards.
The July advisory follows the March notice and repeats the agency’s guidance that event contracts must be described and evaluated with specificity before they are listed for trading.
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