For the second time this year, the U.S. Commodity Futures Trading Commission (CFTC) has issued a warning to forecast market operators to follow rules when creating contract certificates that operators say cover a wide range of event contracts.
The CFTC, which claims to be the lead regulator of prediction markets, issued an advisory on Friday clarifying that, regardless of ongoing policy discussions and proposed regulations regarding prediction markets, markets retain the ability to certify event contracts as compliant with the Commodity Exchange Act and CFTC regulations without the commission’s prior approval, subject to the legal framework governing self-certification.
Agency on Friday warned on the number of cases of event contracts that are “self-certified” by platforms under the agency’s jurisdiction, “without providing the terms of each proposed permutation and a concise explanation and analysis with respect to the terms of the product, underlying commodity and product compliance.”
“The guidance reiterates that generic certificates based on templates should not be submitted,” the CFTC said in its July 24 announcement. The regulator issued a similar one warning regarding the overly generalized reports of March 12.
The advisory was issued just days before the CFTC’s July 27 deadline for comments on its proposed changes to the rules governing public interest determinations for certain event contracts involving listed activities under the Commodity Exchange Act.
The CFTC has proposed changes to clarify how it determines whether certain event contracts are contrary to the public interest, establishing a three-step analytical assessment framework.
This framework will facilitate evaluate contracts based on their involvement in activities such as terrorism, assassination or gaming, ensuring that only relevant contracts are listed for trading.
If adopted, the proposed rule would fundamentally change aspects of the regulatory landscape for prediction markets, says law firm Ropes & Gray he said in June.
