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The U.S. Commodity Futures Trading Commission (CFTC) has warned prediction market operators against broadly self-certifying template event contracts, saying the practice hampers the regulator’s ability to assess whether contracts comply with federal requirements, including safeguards against market manipulation.
In an advisory issued on Friday, CFTC staff said some exchanges have been self-certifying “broad, template event contracts that bundle together potential contract permutations with differing settlement sources and/or methodologies under a single certification.”
According to the regulator, bundling contracts with different settlement sources or methodologies under a single certification limits its ability to adequately review whether each contract meets regulatory standards, including whether it is readily susceptible to manipulation.
The CFTC said contracts should be grouped only when they share common settlement characteristics. As an example, contracts tied to matches in the 2026 FIFA World Cup could be certified together, while contracts covering other championships governed by different organizations or using different methods to determine outcomes should not be included in the same certification.
The agency said requiring more specific certifications would enable exchanges to better assess risks associated with each settlement source and settlement methodology.
The CFTC has observed a surge in self-certified contracts over the past 18 months, resulting in exponentially more variations of basic contracts being listed on regulated exchanges.