CFTC Tells Prediction Markets to Stop Cut-and-Paste Certs — Again 🎲

The US Commodity Futures Trading Commission issued its second warning of the year on Friday to prediction market operators, reiterating that "broad, template-style certifications should not be submitted" when self-certifying event contracts. The July 24 advisory said the regulator has observed multiple instances of platforms self-certifying 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 agency clarified that, regardless of ongoing policy discussions and proposed rulemaking, markets may continue to certify event contracts as compliant with the Commodity Exchange Act and CFTC regulations without prior commission approval under the existing self-certification framework.

The CFTC issued an earlier warning on the same issue on March 12. According to the Friday announcement, the new guidance is meant to underscore that operators remain bound by statutory self-certification rules even as the commission works toward broader reform of event-contract oversight.

The advisory arrived days before the CFTC's July 27 deadline to submit comments on its proposed amendments governing public interest determinations for certain event contracts tied to activities enumerated under the Commodity Exchange Act, including terrorism, assassination, and gaming. The proposal, first outlined earlier this year, would establish a three-step analytical framework for evaluating whether specific contracts are contrary to the public interest. Law firm Ropes & Gray wrote in June that the rule, if adopted, "would fundamentally reshape aspects of the regulatory landscape for prediction markets."

The CFTC has positioned itself as the primary regulator of prediction markets and has signaled that further enforcement or rule changes could follow depending on the comment submissions and the commission's subsequent deliberations on the proposed framework.