Comments on the CFTC proposal called Conflicts and Affiliations close on 5 October 2026. Most of the attention it has drawn, ours included, has gone to what the document says. For a category this young, a second reading is more useful: hold it against the proposal that came before, and see which requirements did not survive the trip.
That earlier proposal is public and unusually close to this one in subject. On 19 March 2024 the Commission published a notice of proposed rulemaking on exchange governance and conflicts of interest (RIN 3038-AF29, 89 FR 19646), eighty Federal Register pages of it. On 15 September 2025 the Commission withdrew it (90 FR 45007). Eleven months later it proposed rules on the same statutory core principles again.
The two documents share two section numbers and, apart from those numbers, almost nothing else.
Fourteen sections of part 38 went in, and five came out
The arithmetic sits in the amendatory instructions, the part of each document that names exactly which regulations change. The 2024 proposal carried fourteen of them for part 38: revisions to Commission Regulations 38.2, 38.155, 38.702 and 38.801, amendments to 38.5 and 38.158, and seven new sections numbered 38.851 through 38.858, with parallel work for swap execution facilities in part 37.
The 2026 proposal carries five: revisions to 38.604 and 38.606, new 38.852 and 38.853, and a rewrite of the acceptable practices under Core Principle 16 in Appendix B. Two of those numbers appeared in the withdrawn text too, which makes the overlap look larger than it is. In 2024, proposed 38.852 governed conflicts in an exchange's own decision making and proposed 38.853 restricted the use and disclosure of material non-public information. In 2026 the same numbers carry affiliate conflicts and board composition. The shelf was reused; the contents were not.
The second document does not make the comparison for you. Searching its full text for the earlier citation returns nothing: no 89 FR 19646, no RIN 3038-AF29, no mention of the withdrawal. A reader who starts with the August 2026 proposal has no way to learn that a broader version of it was written, published for comment and abandoned.
The stated reason for dropping it and the stated reason for restarting point opposite ways
The withdrawal notice gives its reasoning in three sentences. The Commission wrote that it was reconsidering the proposal "given recent changes to the industry and evolving market structures", and added that many exchanges are part of larger corporate organisations "that have already implemented governance standards and requirements for conflicts of interest". Acting Chairman Caroline Pham voted in favour and no Commissioner voted against.
The 2026 proposal opens from the other end. It grounds itself in section 8a(5) of the Commodity Exchange Act and says the Commission has observed increasing numbers of affiliations and therefore believes new rules are reasonably necessary. Belonging to a larger corporate family was the reason to stop in 2025 and the reason to start in 2026.
We noted that reversal when the board composition section was published, and it is worth being fair about it. An agency may change its mind, and the 2024 proposal drew real objections: the Jones Day memorandum on it, by Locke R. McMurray, Laura S. Pruitt, Cameron A. Reese, Darcy R. White and Parker J. Feldman, argued that the Commission had pointed to no governance failures and was getting ahead of potential ones. That is exactly what a comment file exists to collect.
What is missing is the accounting. Withdraw fourteen sections of requirements, revive parts of three, and the record deserves a sentence about the rest. The withdrawal notice attempts none, and it is careless in a smaller way too: its own footnote cites the comment period extension as "89 FR 31669 (May 13, 2024)", but the extension notice was published on 25 April 2024 and 13 May was the deadline it set.
The new rule supervises an officer it never requires anyone to have
Proposed Regulation 38.853(c)(2)(iv) tells a Regulatory Oversight Committee to supervise "the designated contract market's chief regulatory officer (or other officer responsible for regulatory compliance), who will report directly to the ROC". That reads as though a chief regulatory officer were a fixture of an exchange. Nothing in part 38 makes one.
The withdrawn proposal would have. Its 38.856 required every contract market to establish the position, gave it supervisory authority over all market regulation staff, barred anyone disqualified under sections 8a(2) or 8a(3) of the Act from holding it, made appointment and removal conditional on the oversight committee's approval, required notice to the Commission within two business days of any appointment or removal including interim ones, and put the officer's pay in the board's hands in consultation with that committee.
The difference matters at the moment when it is least convenient. An officer who can be removed by the people whose products they review is a title, not a control, and the withdrawn rule made the removal visible to the regulator inside forty-eight hours. Under what is proposed now, an exchange could dismiss the person supervising its listings on a Friday and the rule would have nothing to say about it.
There is a quiet loosening inside the words that did return. Today's Appendix B tells the oversight committee to "supervise the contract market's chief regulatory officer". The proposed rule text copies that line and adds the parenthetical "or other officer responsible for regulatory compliance". The Commission introduces this whole section by saying it proposes to codify the existing acceptable practices "without material changes". Widening a named office into any officer with compliance duties is the second departure from that phrase we have found, alongside the shift from can to shall in the disciplinary panel language.
Nothing in the rulebook stops an exchange employee from trading what the exchange lists
This is the largest of the gaps, and for prediction markets the one that should keep an operator awake. Withdrawn Regulation 38.853 would have required every contract market to adopt policies prohibiting employees from trading any commodity interest listed on their own exchange, any related interest, and any interest on another venue about which they hold material non-public information. Exemptions were narrow: case by case, approved by the Regulatory Oversight Committee, and granted only where the employee could show the trade was not based on information gained through official duties.
The definition attached to it is the part that translates directly to this category. The proposal defined material information to include, among other things, "the regulatory actions or proposed regulatory actions of a designated contract market or a linked exchange". On a futures exchange that means rule changes and enforcement. On a prediction market it means something sharper: whether a contract gets listed, when it is pulled, which source the exchange will treat as settling it. Those are not background facts about the market. On an event contract they are frequently the thing being traded, which is why we have argued before that inside information is the trust test for this category.
What exists today is one sentence of guidance. Paragraph (a) under Core Principle 16 in Appendix B says the Commission believes a contract market should provide appropriate limitations on the use or disclosure of material non-public information gained by board members, committee members and employees. Appendix B says of such guidance that it "is illustrative only" and "is not intended to be used as a mandatory checklist". The 2026 proposal leaves that paragraph untouched and rewrites only the acceptable practices below it.
The new proposal does address non-public information, but in one direction only. Proposed 38.852(b)(1)(i) requires a venue's systems to prevent sharing non-public information with an affiliate futures commission merchant. That is leakage outward to a corporate sibling. An exchange employee opening a personal account elsewhere and trading on a pending delisting is a different failure, and after this rulemaking the only text addressing it would still be an illustrative sentence.
Three months of advance notice became ten business days after signing
Under Regulation 38.5(c) as it stands, a contract market must notify the Commission of a transaction transferring ten percent or more of its equity interest, at the earliest possible time and in any event within ten business days of entering a firm obligation to transfer. The notice follows the handshake.
The withdrawn proposal would have replaced that with a report due no later than three months before the anticipated change, unless the exchange genuinely could not have known that far ahead, in which case it reports as soon as it does. It also widened what counts. Alongside a ten percent ownership shift, an exchange would have had to report the creation or elimination of a subsidiary and the transfer of substantially all of its assets, and file an organisational chart, a description of the change's purpose and impact, and the agreements effecting it.
The stated reason was operational. Staff conduct due diligence on such changes, and the preamble explains why the corporate layer above the exchange is the part they need to see: budget decisions taken at a parent can cut compliance staffing or change surveillance vendors, and a new affiliate structure may require different conflicts procedures. None of that is visible from a notice filed after the deal is signed.
Two smaller asymmetries the withdrawn proposal flagged are still in force. Regulation 37.5(c)(1) gives the Commission explicit authority to request supporting documentation from a swap execution facility after an equity transfer notice, and 37.5(c)(4) makes that facility certify within two days that it still meets its statutory requirements. Contract markets owe neither.
Approve became review, and a panel chair became a panel member
Even the sections that came back came back lighter, which is easiest to see in the oversight committee. The 2024 version, proposed 38.857, would have required the committee to approve the regulatory budget and the number, hiring, termination and compensation of regulatory staff. The 2026 version requires it to review the same list. It would also have set a floor of two directors, required quarterly meetings and minutes, and barred anyone with a conflict from the deliberations. The proposed rule carries none of those four.
Disciplinary panels moved the same way. Withdrawn 38.858 would have required at least two people on every panel, with a public participant chairing it, and barred any member from voting on a matter where they held a conflict. Proposed 38.853(d) requires one person who would qualify as a public director, with no chair requirement and no recusal rule. Chairing a panel and sitting on it are not the same job, and on a three-person panel the difference decides who sets the agenda.
The board rules lost three requirements in the same way. Proposed 38.854 in 2024 would have required every director to have relevant expertise, required an annual board self-assessment, and required that the pay of public and other non-executive directors not be directly dependent on the business performance of the exchange or any of its affiliates. Proposed 38.853(a) in 2026 carries the thirty-five percent figures and the public director definition, and none of those three. For a venue whose affiliate is a market maker, the compensation clause was the one that bit.
The staffing rule was the only one written for an exchange with affiliates
Regulation 38.155 is titled Compliance staff and resources and requires an exchange to keep enough compliance staff for audit trail review, trade practice and market surveillance and real-time monitoring, and to review that staff's size and workload annually.
The 2024 proposal would have retitled it Sufficient staff and resources, tied it to the defined term market regulation functions rather than to a department, and added to the annual review an explicit factor: any responsibilities that staff have at affiliated entities. That is the shared-headcount problem stated as a rule. A prediction market that runs lean and borrows people from a parent would have had to write down, once a year, how much of its surveillance capacity is actually somewhere else.
The defined term went with it. The 2024 proposal built everything on a definition of market regulation functions, naming the core principles it covered, so that fitness, staffing, oversight and conflicts all pointed at one perimeter. That phrase appears zero times in the 2026 proposal, which is a document entirely about affiliates that dropped the one staffing factor mentioning them.
One detail belongs in the record because it repeats. In the withdrawn text, proposed 38.855 told a nominating committee to identify candidates consistent with "the composition requirements set forth in Sec. 38.853", but composition sat at 38.854 and 38.853 was the information rule. The swap execution facility twin of that paragraph, 37.1205, points correctly at 37.1204. The contract market branch carried the error and the swap branch did not, the same asymmetry we found in the 2026 text two years later.
What a venue can put on paper before 5 October
None of the eight groups of requirements above is law, and the Commission is not obliged to revive any of them. The narrower point is more useful to an operator: a requirement a regulator wrote out in full, published, and then declined to impose is the cheapest specification this category will ever be handed.
Four of them can be adopted unilaterally, this quarter, by any venue that wants to:
- An employee trading policy with the exchange's own listing decisions inside the definition of material information. Not a generic insider trading policy borrowed from a broker. Name the listing, delisting and settlement-source decisions, and name who approves exceptions. This is Directive 02 territory and costs nothing but candour.
- A published removal protocol for the officer who runs market regulation. Who can dismiss them, who must approve it, and who outside the company is told within two business days.
- Advance disclosure of ownership and structure changes. Three months is the number the Commission once chose. An exchange that cannot commit to three can commit to something and say what it is.
- An annual statement of how much of the surveillance team is shared with an affiliate. One number, published. It is the metric that makes the rest legible.
The fifth route is the comment file itself, open on RIN 3038-AF76 until 5 October 2026 and the ordinary way to say that the oversight committee should approve a budget rather than review one. The Commission announced the proposal on 30 July 2026 and has asked how exchanges actually structure their reporting lines. That question has an answer, and the people who know it run the venues.
A withdrawn proposal is not a dead letter. It is a description, written by the people who inspect these markets, of what good governance looked like to them when they had no reason to flatter anyone. The category can adopt it before anybody is made to, or wait and find out which version comes back next.