The question this category keeps asking about enforcement is whether a regulator can really reach a venue that sits offshore. Two settled orders entered in June 2026 answer it, from a direction the question does not expect. Neither agency reached a venue. They reached the firm that built the venues, ran their pricing and order flow and held their customers' money, and the affiliate that screened those customers on the way in. The fifteen branded brokers that actually took the United States trades were charged with nothing.
Three months later the Commodity Futures Trading Commission published the other half of the picture, a written list of conditions a software provider has to meet to stay outside the registration category, with event contracts named in it. For anyone who supplies anything to a prediction market, that pair of documents retires the old question. It is no longer whether a regulator could reach the supply layer, but which of the published lines a supplier already crosses.
The orders name a vendor, an affiliate, and nobody else
The Commodity Futures Trading Commission entered its order on 26 June 2026 in CFTC Docket No. 26-02, In the Matter of Netrios LP Ltd. and Red Acre Ltd., and announced it on 29 June as release 9263-26. Netrios is incorporated in Saint Lucia and, since January 2024, is the successor to Netrios Ltd. of Dominica. Red Acre is incorporated in Malta. Neither has ever been registered with the Commission in any capacity.
The Securities and Exchange Commission settled charges against the same two firms on the same day, in Administrative Proceeding File No. 3-22654, Securities Act Release No. 11425 and Exchange Act Release No. 105803. The pair describes one business from two statutory angles: leveraged retail commodity transactions that belonged on a designated contract market, and stock based contracts for differences treated as security based swaps that had to be registered and exchange traded.
The number that matters sits in paragraph 15 of the securities order. Between 2019 and 2025 Netrios facilitated the creation and operation of at least fifteen white label brokers that were, in the order's words, primarily owned or operated within the United States, with websites publicly available to anyone in the country, and none registered in any capacity. Not one of the fifteen is a respondent. Neither order names a single brand, and neither explains the choice.
The penalties are identical on both sides of the pair. Each order requires Netrios to pay 1,750,000 dollars and Red Acre 750,000 dollars within ten days, which is 2.5 million dollars at each agency. Read in full, neither order credits the other agency's payment against its own, and the securities order does not mention the Commodity Futures Trading Commission anywhere in its text.
What the service that got charged actually contained
The commodities order lists what Netrios sold, and the list is why the enforcement landed where it did. Netrios introduced the operators to service providers for overseas incorporation, handed over a ready to operate website running trading software it sub-licensed, established the margin accounts that held customer funds, provided trade execution and liquidity, and performed the back office functions. The order then adds the sentence that explains the structure: the technology and infrastructure furnished to each white label entity were largely identical except for the branding, and the branding was the operator's contribution.
The securities order goes further. Paragraph 10 records that Netrios populated the pricing, received and executed the orders, kept the records, and controlled the customers' trading data and identity information, including how much of it the branded operator could see. Paragraph 12 records that it also provided the liquidity, assumed the profit and loss, and hedged across its portfolio of white label brokers. Paragraph 7 records that the default language, terms and products on the branded websites came from Red Acre, legal terms and conditions included.
Strip that down and the brand owned a name, a logo and a colour scheme. Everything a regulator, a liquidator or an aggrieved customer would ask about sat one layer below what the customer was looking at. That is the fault line this site described in The First Screen a Trader Sees Belongs to Someone Else, and the problem a state court put to a regulated venue in Michigan Asked a Question the Exchange Cannot Answer Alone. Here it is not a theory about intermediated distribution but a finding of fact in a settled order.
Directive 02 of our manifest asks that custody arrangements and conflicts of interest are stated in plain language on the surface where the trade happens. On fifteen surfaces, custody and counterparty were the same undisclosed firm.
The screening existed and asked the wrong question
The most useful finding in either order is the one easiest to misread as an absence of controls. There was a know your customer process, and it worked. Paragraph 9 of the securities order records that it restricted trading by customers in certain countries. What it did not do was ask about money:
Aside from identity verification, customers were not required to provide other information during the KYC process, such as proof of total assets or amounts invested.
The next sentence draws the conclusion: there was no attempt to verify the status of customers as eligible contract participants. U.S. residents were permitted to register and trade, and made up the majority of customer accounts at certain white label brokers.
That missing field is the whole case. The eligible contract participant test for an individual sits in section 1a(18)(A)(xi) of the Commodity Exchange Act, and it is a threshold of amounts invested on a discretionary basis in excess of 10,000,000 dollars, or 5,000,000 dollars where the transaction manages risk on an asset or liability the individual holds. Both theories run through it. The commodities theory applies section 2(c)(2)(D) to leveraged transactions offered to such a person without delivery inside 28 days, pulling in section 4(a) and its designated contract market requirement. The securities theory applies section 5(e) of the Securities Act and section 6(l) of the Exchange Act to security based swaps sold to the same persons, using the definition at 15 U.S.C. section 78c(a)(68).
For a prediction market the lesson generalises cleanly, and it is not about offshore venues. Any venue that treats the existence of an onboarding flow as the answer is the venue in this order. Geography was screened and identity was screened, while the one field that decided whether the customer was lawfully there was never collected.
Two agencies ran two mental states over one set of facts
Red Acre's exposure is worth reading twice, because the two orders reach it by routes that are not equally hard to trip. The commodities order proceeds under section 13(a) of the Commodity Exchange Act, which makes a person who wilfully aids or abets a violation liable as a principal. Quoting its own precedent in In re Societe Generale S.A., CFTC No. 18-14, the order sets out three elements: the Act was violated, the aider knew of the wrongdoing underlying the violation, and the aider intentionally assisted the primary wrongdoer. Knowledge of the conduct is required, knowledge that it was unlawful is not, and knowing assistance can be inferred from the surrounding circumstances. The order finds that Red Acre intentionally performed its acts knowing what Netrios was facilitating.
The securities order takes the causing theory under Section 21C of the Exchange Act and lands on a lower standard. Paragraph 20 finds that Red Acre caused the violations through know your customer services that did not verify eligible contract participant status, and through marketing, and concludes that it thus knew or should have known that this conduct would cause them.
Supplier side, that is the operative difference, because the securities route does not require anyone to prove you meant it. A vendor whose eligibility screen does not test eligibility is inside the standard on the strength of what it should have known. Outsourcing the check moved the work and not the exposure.
Shutting the business down nine months earlier did not end it
Both orders record that the activity stopped before any charge was brought. The commodities order states that as of 30 September 2025 the respondents ceased business related to leveraged or margined retail commodity transactions, and the securities order says Netrios stopped serving the white label brokers in September 2025. The orders were entered nine months later. The settlement cost more than the money, too: the respondents waived a hearing, judicial review by any court and any right to a federal district court in the first instance with a jury, and agreed the findings may be given preclusive effect in other Commission proceedings.
The press release closes by thanking the Securities and Exchange Commission, the Central Bank of Ireland, the Financial Services Authority of Seychelles and the Malta Financial Services Authority for their assistance. Only one of those four jurisdictions is a place of incorporation of either respondent, and neither order explains what the other two contributed. The structural point stands without that explanation: a business assembled across Saint Lucia, Dominica and Malta was resolved with help from four authorities, inside a year of the last trade.
Twelve weeks later the same agency wrote the supplier standard down
On 17 September 2026 the Market Participants Division of the Commodity Futures Trading Commission issued CFTC Staff Letter No. 26-25, announced as release 9300-26 and signed by division director DJ Hennes. It generalises a position given to a single firm on 17 March 2026 in Letter 26-09, issued to Phantom Technologies, Inc., and makes it available to other providers of passive software. The covered activities take in orders submitted directly to registrants including event contracts, perpetual contracts, and other Commission-regulated derivatives. Prediction market distribution is inside the scope by name.
The letter then draws the line the June order had priced. Describing what a passive software provider does, it states that at no point would the provider hold, control, or take into custody user assets, generate express buy or sell signals, or exercise discretion over the routing or execution of user orders. Four of the ten conditions it attaches read as a direct inversion of the Netrios structure:
- Condition 4 requires that users are onboarded as direct members of the designated contract market, or as customers of a registered futures commission merchant or introducing broker, and keep the ability to reach that registrant independently of the software provider.
- Conditions 2 and 3 require disclosure of the provider's relationship with the registrant and its conflicts including fees, plus a risk statement covering the risks in Commission Regulation 1.55(b) where the registrant is not already obliged to give one.
- Conditions 5 and 6 require the provider to follow Commission and National Futures Association marketing rules as if it were a registered introducing broker, and to avoid promotions needing pre-approval under NFA Compliance Rule 2-29.
- Condition 7 requires the provider and each registrant to sign an undertaking accepting joint and several liability for violations in the covered activities and consenting to the Commission's jurisdiction to investigate and act. Condition 10 requires a notice filing carrying the same consent.
The relief has limits worth stating plainly, because this is a staff letter and not a rule. Issued under Commission Regulation 140.99, it represents the views of the division only, is expressly not binding on the Commission, runs until a Commission rulemaking or guidance on introducing broker registration for software developers takes effect, and can be conditioned, modified, suspended or terminated at the division's discretion. A supplier leaning on it is leaning on a position that can be withdrawn, which is a reason to meet the conditions rather than to cite the letter.
Read together, the two documents describe the same layer
Netrios held the margin accounts, and the conditions say a provider holds nothing. Customers were onboarded on the branded website and the brand decided what it could see, while the conditions put the user with the registrant and keep a route open to it. There was no registrant anywhere in the Netrios structure, and the relief exists only where there is one. Netrios set the default products and took the other side, both ruled out by the bans on routing discretion and on buy or sell signals. Red Acre wrote the terms, screened the customers and ran the marketing, and the conditions attach disclosure duties and introducing broker marketing standards to exactly that work. Nobody in the June order had consented to anything, and consent to jurisdiction is condition 10.
Directive 05 of our manifest says that standards are set against the jurisdiction that regulates next, not only the one that has not yet. This is an unusually literal instance of it. The next jurisdiction published its expectations for the supply layer in a seven page letter, for free, twelve weeks after an order showed what not having them costs. The three letters we wrote about in Three Letters Asked the CFTC to Act on Someone Else each asked the regulator to constrain somebody else. This document asks nobody for anything. It states what a supplier does, in ten numbered lines.
What a supplier can put in writing this month
None of what follows needs a rulemaking, a licence or a lawyer's opinion. Each item is answerable from a company's own records, and each was a finding in the June orders.
Say whose balance sheet holds the money, on the surface where the trade happens rather than in a schedule. Name the registrant, and if the honest answer is that none stands behind the account, treat that as a finding rather than a gap in the paperwork. Check that the eligibility screen tests eligibility and not only identity and country, and that the record shows which field was collected. Decide, before anyone asks, who can answer a regulator's question about a named customer, and whether the firm whose name is on the website is on that list.
Most of that a trader cannot verify from outside. The one public tool pointed at this problem, the Commission's Registration Deficient List, names foreign entities that appear to act in a capacity requiring registration, and the Commission is careful to say that appearing on it is not a finding of any violation. A list of names helps a person who knows the name. Here the names a customer could look up were fifteen brands that appear in neither order, and the two firms charged were never on any customer's screen.
We are an initiative of operators and we are in favour of these markets existing, which is exactly why the supply layer is our problem and not somebody else's. A category whose venues are compliant and whose vendors are undescribed has not solved what it thinks it has, and the documents that will be used to judge it are already written and already public.