Issuer-specific prediction markets test SEC-CFTC boundary

Prediction-market platforms are increasingly listing contracts tied to company-specific outcomes, including earnings, revenue, production and share-price movements. A related question is whether some products should be regulated as security-based swaps, under the Securities and Exchange Commission, rather than as swaps principally overseen by the Commodity Futures Trading Commission.

The SEC and CFTC jointly sought public comment on June 18 on updating and harmonising derivatives definitions and interpretive questions. The request explicitly included event-based products and asked whether existing definitions and jurisdictional frameworks still fit changing market structures, products and trading practices.

The exercise focused on classifications under Title VII of Dodd-Frank, rather than challenging the CFTC’s authority over event contracts generally. SEC Chairman Paul S. Atkins said clarification was “long overdue” on definitional questions involving event-based products, while CFTC Chairman Michael S. Selig said the request could resolve longstanding ambiguities and clarify the boundary between the agencies.

The distinction matters because a security-based swap can include a contract based on an event affecting a single securities issuer’s financial statements, financial condition or financial obligations. The joint request asked whether further guidance was needed on what it means for an event to directly affect those areas, and when a swap meets the event-contract prong of the security-based-swap definition.

Classification can alter the rules governing registration, trading venues and who can access a product. Seward & Kissel noted that security-based swaps offered to retail investors who are not eligible contract participants generally require an effective registration statement and sale on a national securities exchange. Many prediction-market platforms allow broad retail participation, making that threshold particularly consequential for issuer-specific contracts.

The contracts already span measures that sit close to companies’ operating and financial performance. Kalshi has offered markets on Sweetgreen’s second-quarter profit margin, Tesla’s quarterly production and McDonald’s global sales growth, according to a Bradley analysis. Polymarket has listed weekly contracts on Tesla and Airbnb share-price performance.

Event contracts are generally binary: a correct prediction receives a fixed payout and an incorrect one receives nothing. Their prices are set through continuous buying and selling, and can convey the market’s implied probability of the specified outcome. The CFTC has said such markets can provide information aggregation and price discovery, as well as a way to hedge risks for which no traditional instrument exists.

The jurisdictional question arrives as the wider prediction-market business grows. Trading across CFTC-registered prediction markets exceeded $25 billion in 2025, though that remained small beside the approximately $31 trillion notional value of the CFTC-regulated futures market.

The broader policy debate also includes the CFTC’s separate June proposal to define more clearly which event contracts may be found contrary to the public interest and barred from listing or clearing through CFTC-registered entities, as this publication reported in August. That proposal would also establish decision factors, revise the determination process to align with the Commodity Exchange Act, define “gaming” and address when an event contract involves an underlying activity.

The SEC-CFTC comment period was set to run for 60 days after publication in the Federal Register. The CFTC’s separate proposal drew 1,458 comments through Regulations.gov.