On 12 March 2026 the Division of Market Oversight of the Commodity Futures Trading Commission sent every designated contract market a six page letter titled Prediction Markets Advisory, announced as Release 9193-26, catalogued as CFTC Staff Letter 26-08 and signed by Frank N. Fisanich, then the division's acting director. Much of it restates obligations a regulated exchange already lives with, but its third part describes in ordinary sentences what a defensible event contract submission contains.
Four months later, on 24 July 2026, the same division published a second advisory on the self-certification of an event contract series, announced as Release 9273-26 and signed by a different acting director, Duncan Hennes. One sentence in it is the reason for this piece. Of exchanges that bundle many contract permutations into a single certification, the division writes that "[n]otwithstanding CFTC Staff Letter No. 26-08, many DCMs continue to self-certify event contracts pursuant to Broad Template Certifications".
We are for these markets and would like to see them list more contracts rather than fewer, which is why that sentence is worth sitting with. Nothing in the March letter was withheld, priced or negotiated. It was published, free and addressed to the whole industry, and four months later the division that wrote it had to write it again.
What the March letter put in writing about contract design
Section III of Staff Letter 26-08 opens with a finding that reads like a design brief. Sports related event contracts and event contracts generally, the division writes, "have often been shown to be consistent with DCM Core Principle 3 where the settlement outcome depends on the aggregate performance of multiple participants over an extended period of play". Core Principle 3, set out in section 5(d)(3) of the Commodity Exchange Act (7 U.S.C. 7(d)(3)), obliges an exchange to list only contracts that are not readily susceptible to manipulation.
The reason given for that finding is the part worth memorising. Breadth of outcome reduces the ability of any single actor to move the settlement value without material cost or a real risk of detection. A season aggregate is harder to bend than one official's decision in a single minute, and the letter names the categories that run the other way: contracts settling on injuries to individual participants, on unsportsmanlike conduct, on physical altercations, or on the action of a single individual or small group.
Then it says what the paperwork should look like. Staff would expect a submission to describe the settlement methodology for the contract's differing potential permutations, identify the specific data sources settlement will run on, and assess the reliability, objectivity and manipulation resistance of those sources. A footnote closes the most convenient loophole: settlement on a consensus of yet to be determined sources "may not be sufficient" to satisfy Core Principle 3.
None of this is a rule, and the letter is candid about it. Both advisories end by saying they may not be relied upon to create any rights and represent only the views of the division, which makes them a written account of what the people reviewing a filing will look for.
Four measures arrived as advice before they arrived as a scoring rule
The sports part of Staff Letter 26-08 recommends four steps. Talk to the relevant league or governing body before you self-certify, while the terms and the oversight programme are still being written. Explain in the submission whether the contract fits that body's integrity standards. Establish information sharing and data arrangements with the relevant sports integrity monitoring organisation. And use official league data as the settlement source. Two habits follow: consult any league guidance on restricted or insider participant lists, and cooperate with league run investigations.
On 12 June 2026 the Commission published its proposed rule Prediction Markets; Public Interest Determinations, and those same relationships turned up inside it as factors the Commission would weigh when deciding whether a contract is contrary to the public interest. We wrote about that shift in the piece on information sharing agreements, where four of the six positive factors describe the product and two describe a relationship somebody else has to agree to. The March letter shows the relationship was being recommended in writing a quarter before it became a factor anyone would be scored against.
Nothing in the letter was limited to sport
The advisory says so on its first page. While certain aspects focus on sports related event contracts, the division writes, the core principle compliance and product listing requirements it highlights "apply equally to other categories of event contracts" and to derivative products generally. The Commission repeated the point in footnote 271 of the June proposal, which cites pages four and five and adds that the requirements discussed there apply to all event contracts self-certified by prediction markets, not only those caught by the Special Rule for enumerated activities.
It also sits in a sequence. Two weeks earlier the Division of Enforcement had issued its own prediction markets advisory, and the March letter points back to it, restates that Commission Regulation 180.1 reaches misappropriation of confidential information, and treats real-time monitoring as the standing obligation it is under 17 CFR 38.157.
Core Principle 3 reaches an event contract through the paragraph about binary options
Staff Letter 26-08 routes its design guidance through Appendix C to part 38. Most of that appendix was written for commodities with a cash market behind them, so it asks about deliverable supply, about the liquidity of that cash market, and about how many participants a settlement price survey reached.
An event has no cash market to survey. The paragraph that actually carries event contracts is paragraph (f), Non-Price Based Futures Contracts, whose first line says these contracts are typically construed as binary options. Its second asks the questions that matter for a yes or no market: the nature and sources of the data in the settlement calculation, the computational procedures, the mechanisms ensuring the index value is accurate, and whether the third party has or will adopt safeguards against "unauthorized or premature release of the index value itself or any key data used in deriving the index value".
That last clause is the risk we described in Settlement Risk, stated as a document requirement rather than as a principle. The moment a number exists somewhere before it exists publicly, part of the market knows the answer, and Appendix C asks the exchange to say in writing what the data provider does about that window.
In July the division put the shortfall on the record
Staff Letter 26-22 gives the practice a name. A Broad Template Certification is a filing under Regulation 40.2(a) that bundles contract permutations with differing settlement sources or methodologies under a single certification. The letter names two harms. The first is the division's own: the practice hampers its ability to determine whether an exchange supplied everything Regulation 40.2 requires and adequately evaluated the settlement methodology, data sources and core principles compliance of every permutation.
A footnote gives an example from filings the division has seen: contracts about whether unspecified economic events may occur, with vague lists of underlyings including unidentified economic metrics, recurrent data releases, international agreements and central bank decisions. Read that against the March expectation of a named settlement source per permutation and the gap needs no interpretation. Nor was July the last word of that season, because on 12 August 2026 the division published Staff Letter 26-23 on incentive programmes, which we covered in Bought Volume Is Not Demand.
A class certification exists, and it comes with four conditions
The useful half of the July letter is that it does not demand one filing per contract. It points at Regulation 40.2(d), the class certification route added in the 2011 rulemaking Provisions Common to Registered Entities at 76 FR 44776. It was built for interest rate swaps, which made up roughly 77.5 per cent of outstanding over the counter notional at the time and shared pricing sources, though the Commission said even then it could serve swaps based on the occurrence of events.
Four conditions have to hold for every contract inside the class. It must be based on one of the excluded commodities the rule lists. It must share an identical pricing source, formula, procedure and methodology for calculating reference prices and payment obligations. That source and methodology must match one in a product already certified under Regulation 40.2 or approved under Regulation 40.3. And the currencies must be identical.
The third condition is where the July letter adds teeth. The anchor has to be a prior, specific contract and explicitly not another broad template, an exchange may reference only its own previous filings, and the referenced contract should be cited by its Official Product Name and Official Receipt Date. Regulation 40.2(d)(2) then lets the Commission require the certification to be withdrawn and each contract resubmitted. In the division's words, exchanges "should not assume that certifying multiple contracts in a single filing insulates any one contract from individual review".
The example that decides a class turns on whether a draw is possible
Staff Letter 26-22 then does something advisories rarely do and works the example. An exchange may consider certifying a series under Regulation 40.2(d) for all matches in the 2026 FIFA World Cup by referencing a prior individual certification for a contract asking whether Mexico would beat South Africa in that tournament, provided the whole series shares that contract's pricing source and methodology. It may not use that anchor for a series covering the 2026 MLS Leagues Cup, and the stated reason is not that one is bigger or more watched. It is that the competitions run under different rules, and the World Cup permits draws in its first round while the Leagues Cup does not.
A draw is not a detail of atmosphere. It is a third outcome, and a third outcome changes the payout definition, which is what the class conditions are about. The same letter lists other series it thinks could qualify: games in a tournament whose outcomes are each determined by identical rules, with a women's singles tennis tournament as its example; election outcomes arising from a single ballot; nominees in one awards show chosen by the same process; and daily rainfall for a city from the same official weather station and measurement methodology.
Line those up and the boundary of a class is visible. It is not the sport, the topic or the calendar. It is the settlement rule, which anyone who has designed a market knows is where the surprises live, and our reading of the proposed definition of gaming met that lesson from the other direction.
The filing is supposed to be readable by the people trading the contract
The second harm the July letter names is ours as readers. Broad templates, it says, prevent market participants from accessing and evaluating the information a submission is meant to contain, and that is not an abstract complaint. Regulation 40.2(a)(3)(vi) obliges the exchange to certify that it posted, when it filed, a notice of the pending certification and a copy of the submission on its own website. Material it seeks to keep confidential may be redacted, which is lawful and ordinary; the rest is public by rule, on the venue's own pages, the day it files.
Directive 02 of our manifest asks that "[f]ees, spreads, settlement sources, custody arrangements and conflicts of interest are stated in plain language on the surface where the trade happens". A submission naming one settlement source per contract, posted where a trader can find it, is that directive half built by regulation already. A template listing unnamed sources satisfies neither the rule nor the reader.
Day thirty is not where this work can begin
The last reason to care in September about a letter from March is the schedule the June proposal would put around a contested contract. As we set out in the piece on the right to respond, a review would open with a written determination no later than ten days after listing, concerns would follow by day fifteen, and day thirty is the single point in the timetable where the exchange may propose a modification to the contract.
Staff Letter 26-08 closes by reminding exchanges of an authority that needs no new rule at all. Under Regulation 40.2(c) the Commission may stay the listing of a self-certified contract while proceedings for filing a false certification are pending, or while a petition to alter or amend its terms is pending under section 8a(7) of the Commodity Exchange Act (7 U.S.C. 12a(7)), and that decision may not be delegated to any employee. The July letter adds that where a certification is inadequate, the division may recommend that stay.
The document that carries the weight of a review is therefore the submission already on file, and the only negotiating slot in the schedule is thirty days wide. A permutation table, a named settlement source and a manipulation resistance assessment cannot be written inside that slot; they are the reason it is survivable.
What we would want on the shelf before the next listing
None of it waits on a final rule, and all of it was described in public documents between March and July 2026.
- One named settlement source per contract, identified before listing rather than at resolution, with the fallback in the same sentence.
- A permutation table for any template, listing every variant the exchange intends to list and the methodology each one settles on.
- A class definition citing its anchor filing by Official Product Name and Official Receipt Date, and an honest answer to whether every member shares that methodology.
- A written assessment of reliability, objectivity and manipulation resistance for each source, including what the provider does about early access.
- The public half of the compliance analysis posted where the contract trades, not only where the regulator keeps it.
Directive 05 says that "[s]tandards are set against the jurisdiction that regulates next, not only the one that has not yet". This is the easy version of that problem, because the jurisdiction that regulates next wrote its expectations down twice in letters anyone can download. A venue that wants to be measured against a standard it helped shape can sign the commitment, and it can start tonight with a filing that names its sources.
A published standard is the cheapest one a venue will ever meet
There is a version of this category's story in which the rules arrive as a surprise and the industry is entitled to complain, and these two advisories make it harder to tell. A staff letter binds nobody, and it is also the closest thing to being handed the marking scheme before the exam. Between March and July 2026 the division wrote down what it wanted, watched what came in, and reported the difference.