1. CFTC Seeks Public Comment on Notice of Proposed Rulemaking Concerning the Inclusion of Certain Event Contracts in the Definition of ‘Swap’
On October 9, the Commodity Futures Trading Commission (CFTC) published a proposed rule adding new paragraph (2)(i)(G) to the definition of “swap” in 17 CFR § 1.3 to expressly include “event contracts, including those based on sports, politics, cultural, and weather-related events.” The CFTC notes that its authority under Dodd-Frank allows it to “further define” the term “swap” and argues that event contracts already qualify as swaps under several prongs of the statutory definition. The CFTC’s proposed rule follows a developing circuit split (KalshiEX v. Assad (9th Cir.) and KalshiEX v. Schuler (6th Cir.)) and conflicting state actions, including Minnesota’s criminalization of prediction markets; Arizona’s criminal charges against a designated contract market (DCM); and court-ordered geofencing in Michigan, Washington, and Nevada. As of September 1, 2026, at least seven DCMs offered sports event contracts, and in August 2026, event contract trading totaled about $1.5 billion, roughly $1.2 billion of which is sports-related. Although the CFTC frames the proposed rule as adding clarity, it would subject non-sports-related event contracts to the CFTC’s DCM Core Principles, and the CFTC retains authority to bar “gaming” contracts it finds contrary to the public interest. See the press release here and the proposed rule here.
2. CFTC Codifies Casino-Style Gambling Carve-Out From ‘Swap,’ Narrowing Its Claim Over Prediction Markets
On October 9, the CFTC published an interim final rule, effective immediately, adding a new paragraph (7) to the “swap” definition in 17 CFR § 1.3 to exclude casino-style gambling products. The exclusion applies where (1) the product is offered by a person licensed under state or tribal law, acting within that license, and regulated as gambling under that law, and (2) it is not traded on an exchange, swap execution facility, or other multilateral or negotiated market. Excluded products include sports wagers, table games, slots, bingo, lotteries, and raffles. Modeled on the 2012 insurance and consumer transaction carve-outs, the rule is less about casinos than about protecting federal oversight of prediction markets: The CFTC distinguishes house-priced bilateral bets from event contracts traded on central order books through centrally cleared DCMs. The CFTC invoked “good cause” to bypass the initial notice and comment period, citing state actions in Arizona, Minnesota, and New York. See the press release here and the interim final rule here.
3. SEC Approves Cboe’s Proposed Rule Change Allowing KPI Binary Options
On October 13, the Securities and Exchange Commission (SEC) approved, on an accelerated basis, a Cboe Exchange proposal to list binary options on key performance indicators (KPIs) reported by certain public companies. The options pay a fixed amount or nothing and are European-style and cash-settled. Further, the options will pay $1 if a specified metric in the issuer’s Form 8-K, 10-Q, or 10-K meets or beats the strike level, regardless of how the issuer’s stock trades. Eligible metrics range from earnings per share and revenue to nonfinancial operating figures such as digital asset trading volume and mining and holdings metrics. Contracts expire on the issuer’s earnings disclosure date. Later restatements do not change settlement. The contracts are fully funded and limited to 25,000 standard contracts per expiration, with 100 binary contracts counting as one standard contract. Existing surveillance, large-position reporting, and CAT reporting requirements also apply. Trading will not begin until the SEC approves the related filings for the new clearinghouse, CCUS, including its application for temporary registration as a clearing agency. See the order here.
4. SEC Announces Roundtable on Machine-Understandable Data and Super Intelligence
On October 19, the SEC announced that it will host a roundtable on November 9 to discuss, among other things, the use of machine-understandable data and super intelligence (SI). The roundtable will cover how the market uses SI and machine-understandable data and the risks and costs related thereto that the SEC should consider. Additionally, the SEC intends to use the roundtable to have a better understanding of how it can better facilitate SI and machine-understandable data.
Joshua White, the Chief Economist and Director of the Division of Economic and Risk Analysis, noted, “In the age of SI, high-quality information is critical. The roundtable will facilitate insightful discussions on the public’s use of machine-understandable data and SI along with associated risks and costs. Feedback from market participants will give the SEC staff insight on how the market and investing public are using machine-understandable data for SI solutions and inform the SEC staff on how the Commission can better facilitate SI.” See the press release here and the agenda here.
5. SEC Approves New FINRA Rule 2210 Exception for Projected Performance and Targeted Returns
On October 15, the SEC approved the Financial Industry Regulatory Authority, Inc.’s (FINRA) proposal to amend FINRA Rule 2210 (Communications with the Public). The amendment permits member firms to project performance or provide targeted returns, subject to certain conditions. The new exception requires a member to (1) adopt written policies and procedures reasonably designed to ensure the communication is relevant to the intended audience’s likely financial situation and investment objectives, (2) disclose the criteria, assumptions, risks, and limitations underlying the projection or target, and (3) keep records of its source. FINRA stated that such communications should go only to investors with the resources and expertise to understand their risks, and generally not to a mass or general retail audience, so the change will primarily affect institutional and sophisticated investors. The exception prescribes no calculation methodology, but the SEC expects members to disclose, depending on the facts, whether figures are net of fees and why figures may differ from actual results. FINRA declined, for now, to extend the exception to backtested, model, related, or extracted performance. See the SEC’s order here.
