CFTC no-action letter eases event contract reporting rules

The CFTC issued no-action relief from certain swap reporting rules for fully collateralized event contracts as prediction market disputes widen.

The US Commodity Futures Trading Commission’s (CFTC) market and clearing divisions issued no-action relief for fully collateralized event contracts, easing certain swap data reporting and recordkeeping obligations for prediction market operators and clearing organizations.

The divisions said Wednesday that they will not recommend enforcement against designated contract markets (DCMs), derivatives clearing organizations (DCOs), or their participants for failing to comply with specified swap-related recordkeeping requirements or for failing to report covered transactions to swap data repositories.

Event contracts on prediction markets technically qualify as “swaps” as they are based on binary events. However, the letter argued that similar contracts are listed for trade by DCMs and have more similar characteristics to futures and options on futures, hence enabling firms to report certain events contracts directly to the CFTC.

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