The letter the Commodity Futures Trading Commission published on 7 August 2026 is remembered for one thing, that event contract prices should not be dressed up as bookmaker odds, and we took that half apart in a piece on why display is a compliance signal. The half nobody quoted sits in the closing paragraph and is not about a format at all. It asks regulated venues to review the information displayed or used by their partners and affiliates.
That is a sentence about a layer. Between a prediction market and a person opening an account for the first time there is usually at least one other company, and the surface where that person meets the category is often a screen the exchange does not own. This piece is about who supervises that layer, what rules cover it, and how little of it the 2026 rulemakings mention.
The last request in the August letter is about a layer, not a format
The three page letter, headed Misleading or Deceptive Practices and signed by DJ Hennes as Director of the Market Participants Division and Acting Director of the Division of Market Oversight, is published by the Commission. It is addressed to CFTC-regulated entities and affiliates, and it hangs on the anti fraud provisions, Commission Regulation 180.1 and section 9 of the Commodity Exchange Act, rather than on gaming.
Two sentences near the end carry the weight. The divisions expect designated contract markets "will ensure that their intermediary market participants, affiliates, and partners do the same", and they ask regulated entities to review pricing displays and marketing material "as well as information displayed or used by their partners and affiliates", confirming receipt by 31 August 2026. That deadline was for confirming receipt, not for fixing anything.
The last page shows the problem on its own. Introducing brokers and futures commission merchants were told to confirm to one mailbox at the Commission, designated contract markets to another. Partners and affiliates were given no address, because for most of them no office expects the letter. They are reached through the venue that pays them or the broker carrying their customers, and that is the letter's only route.
Three different kinds of stranger can stand between the venue and the user
The first is a futures commission merchant, defined in 7 U.S.C. section 1a(28) as a person engaged in soliciting or accepting orders who also takes money or property to margin the trades, with 7 U.S.C. section 6d(a) making it unlawful to act as one without registration. That is not theoretical here. Robinhood states on its own support page, checked on 6 September 2026, that "Event contracts are offered by Robinhood Derivatives, LLC through either KalshiEX LLC, ForecastEX, LLC or Rothera Exchange and Clearing LLC", and describes that entity as a registered futures commission merchant and a member of the National Futures Association.
The second is an introducing broker, defined in section 1a(31) as a person soliciting or accepting orders who does not take customer money. Section 6d(g) is blunt: "It shall be unlawful for any person to be an introducing broker unless such person shall have registered". Solicitation is the trigger, and the absence of a wallet does not remove it.
The third is everything else. Comparison pages carrying sign up codes, creators paid per video, newsletters with tracked links, review sites whose revenue depends on the accounts they produce. Some are ordinary publishers. Some are paid per funded account, which resembles the first half of the introducing broker definition with the money handling removed.
A promotional material rulebook already exists and it is forty years old
NFA Compliance Rule 2-29, adopted in November 1985 and amended last on 21 July 2025, is the closest thing this industry has to a written standard for promotion, and it is rarely cited in this debate. By its terms it binds member futures commission merchants, introducing brokers, commodity pool operators and commodity trading advisors. Inside that perimeter it settles several arguments the category is still having.
- Promotional material may not mention the possibility of profit "unless accompanied by an equally prominent discussion of the risk of loss", under paragraph (b)(3).
- A testimonial is prohibited unless it is representative, states prominently that it does not indicate future performance, and states prominently "that it is a paid testimonial (if applicable)", under paragraph (b)(6).
- Hypothetical results carry a prescribed capitalised disclaimer under paragraph (c), which exists because a trade that was never at risk teaches the wrong lesson.
- Paragraph (e) requires written approval before first use by a supervisor other than the person who prepared the material.
- Paragraph (f) requires the material and that approval record to be kept for the periods in Commission Regulation 1.31, measured from last use.
- Paragraph (h) reaches furthest. A member may not "use or directly benefit from" audio or video promotional material that makes a specific trading recommendation or describes profits, unless it is filed with the association's promotional material review team at least ten days before first use.
The definition in paragraph (i) is not narrow either. It covers communications broadcast over "internet or other electronic medium", email, text and instant messages, and any other written material directed to the public to solicit a commodity interest account, agreement or transaction. Four words in paragraph (h) do the work on the funnel question: a member answers for material it benefits from, not only material it made.
The rule the August letter cites does not bind the exchange that received it
Here is the structural knot. Association membership, and therefore Rule 2-29, covers intermediaries. An exchange is not one, so when the letter offers Rule 2-29 as the same requirement mirrored elsewhere, it points at a rulebook governing the middle of the chain rather than the venue at the end of it.
What binds the venue is Core Principle 12, cited in the letter's own footnote as 7 U.S.C. section 7(d)(12) with Commission Regulations 38.650 and 38.651, which require rules against abusive practices "including fraudulent, noncompetitive or unfair actions" committed by any party. The letter says it plainly: exchanges must protect participants "from abusive, noncompetitive, or unfair actions by other parties involved in the transaction". Supervision of the funnel therefore arrives as a duty to police conduct the venue does not perform, by people it does not employ, on screens it does not control. Unusual as that is, it is the assignment.
Bylaw 1101 turns a marketing question into a registration question
One lever reaches a person nobody registered, and it belongs to the broker rather than the exchange. NFA Bylaw 1101 provides that no member may carry an account, accept an order or handle a transaction for a non member "that is required to be registered with the Commission as an FCM, IB, CPO, CTA or LTM". In practice a member checks the counterparty in the association's public registration database and, if the person is not registered, has to establish why registration is not required.
Apply that to a referral arrangement. If a partner is paid per funded account and its pages describe which markets to trade, someone has to decide whether that is soliciting orders under section 1a(31). The answer turns on facts we cannot assess from outside, and it is not our place to call anyone in breach. The narrower point is harder to dodge: the question has an answer for every partner in a funnel, and a venue that never asked it does not know which answer it relies on.
Seventy six thousand words, and not one of them is affiliate
We searched the published text of the June proposal, Prediction Markets: Public Interest Determinations, on 6 September 2026. It runs to roughly 76,500 words. The words affiliate, intermediary, introducing broker and futures commission merchant appear zero times each. Advertising appears five times, and every occurrence is about someone else's advertising, namely broadcasters, sponsors and advertisers who might use event contract prices as an input to their own decisions. Marketing appears six times, mostly in the sports section, where one bullet asks a venue to consult a governing body about integrity related restrictions applicable to marketing.
The year's most consequential prediction market rulemaking defines gaming, builds a public interest test and sets a review timetable, and never addresses the chain of companies through which retail users arrive.
The March questionnaire asked about advertising once
The advance notice of proposed rulemaking published on 16 March 2026 asked forty numbered questions across roughly 9,300 words, and we described its comment record in a piece on the three letters sent to the Commission. Searched on 6 September 2026, advertising appears in it exactly once, in sub item (e) of question 19, listed among responsible gaming standards next to self exclusion programmes and monetary limits. Marketing, promotional, social media and influencer do not appear at all, and intermediary appears twice, both times inside quoted statutory text rather than in a question.
The record is consistent from March to September. Forty questions covered what may be listed, how it settles and who may trade, and the single sub item on advertising limits arrived attached to the gaming discussion. Two senators had to ask what standards exist at all, in a letter to the Chairman dated 25 June 2026 whose fourth question lists advertising, age verification, addiction warnings, responsible gaming tools, affiliate marketing and influencer disclosures together.
The word affiliate is already taken, and it means ownership
Anyone drafting a policy here should know the term is spoken for. The Conflicts and Affiliations proposal published on 6 August 2026, which we took apart in a piece on the exchange that owns its market maker, uses affiliate well over a thousand times and means something else entirely: an affiliate market participant is a person "including any affiliate introducing broker" under common control with the venue that executes, introduces or facilitates trades on it. Control, not commission.
The consequence is practical rather than semantic. A venue publishing a page about how it supervises its affiliates is using a word that federal rulemaking reserves for corporate siblings, while the reader assumes it means the sites and creators sending traffic. Directive 02 asks for plain language on the surface where the trade happens, and a term with two live meanings is not plain language.
The one proposal that admits the layer exists is about plumbing
One document acknowledges it. The data reporting proposal published on 1 July 2026 observes that some designated contract markets listing covered event contracts "permit participation of intermediaries, and some do not", and that distinction decides who files position data: brokers and clearing members under part 17, or the venue when it is exclusively self cleared. The regulator has therefore recognised in writing that the category runs on two distribution models. It recognised it to know where the numbers come from, not to know who is talking to the customer.
A court reached the brokers before the rulebook did
The gap has already been filled once by a judge. The preliminary injunction signed in Michigan on 1 September 2026, which we read in the context of open positions surviving a geoblock, orders the exchange to deliver the order within three business days to every futures commission merchant offering its sports contracts, and in the same document declines to hold the exchange responsible for what those brokers do, because it does not control whom they serve and does not hold their customers' location data. A state court needed the intermediary layer to be reachable, so it made the exchange the courier, and then conceded that the exchange cannot see through the courier to the customer.
What the funnel does to a first trade
Directive 04 says a first time user should learn what a price means and how a market resolves before learning how to deposit faster. A page leading with a sign up code inverts that order by design, because its revenue depends on the deposit rather than the understanding. The incentive advisory of 12 August 2026 runs the same way, telling exchanges to supervise incentives handed out by third parties, as we described in a piece on why bought volume is not demand.
The most serious allegations here concern material the venue did not display itself. The senators' June letter describes reports of simulated trading websites, staged transactions and undisclosed paid influencers promoting an offshore platform, and CBS News reported on 26 June 2026 that Polymarket said it had opened a review of its promotional content after an investigation by The Wall Street Journal. Those are allegations and a company response, not findings. They show the shape of the risk: the conduct sits one layer out from the product, and the two standards people reach for when it happens, that paid promotion be labelled as paid and a staged trade not be shown as real, are written down in Rule 2-29 already for anyone registered.
What a venue should be able to produce about its own funnel
None of this waits on the consumer protection rule announced in August 2026 and still unpublished. A venue can assemble the following now, and the assembling is most of the value.
- An inventory of every surface that can produce a funded account. Brokers, referral links, comparison pages, creators, newsletters. An unwritten list is not a perimeter.
- A named owner and a contract for each entry, stating the compensation basis: flat fee, per account, per volume, revenue share.
- A registration answer for each entry, in writing, saying why the partner is or is not required to register, and who decided.
- A pre use review record for promotional material, showing who approved it and when, kept for the periods in Regulation 1.31. Rule 2-29 already requires this of brokers, and applying it to unregistered partners applies the best available standard.
- A price display rule that travels. A ban on bookmaker odds is worth nothing if a partner shows them.
- A defined consequence. What happens on a first breach, on a second, and who signs the termination. A standard with no consequence is a preference.
A perimeter is a list of names, not a diagram
This layer stays invisible because everyone with a duty here can point at someone else. The exchange did not write the video, the broker did not design the promotion, and the creator is registered with nobody and assumes none of this applies. The August letter closes the loop in one direction, making the venue answerable for what its partners display, and the association rulebook closes it in the other, making a member answerable for material it benefits from.
Between those edges lies the space where a first time user forms an impression of the whole category. Whoever profits from that surface should be able to say who owns it, what it claims and who approved the claim. That is the entire standard, and no rulemaking is needed to write it down first.