Better Markets Urges SEC to Retain Jurisdiction Over Corporate Event Contracts

Better Markets argued that event contracts tied to corporate performance metrics are security-based swaps that must remain under SEC oversight.

The advocacy group's letter was in response to a joint SEC and CFTC request for comment on whether such event contracts should be regulated as swaps by the CFTC or as security-based swaps by the SEC. Better Markets said the request appeared to be driven by prediction market platforms seeking to offer contracts on corporate key performance indicators, such as quarterly revenue or vehicle deliveries, under the CFTC's jurisdiction. The group argued that because these metrics directly affect an issuer's financial condition, the contracts already meet the statutory definition of a security-based swap under Exchange Act Section 3(a)(68) ("Definitions and application") and should not be reclassified.

Better Markets warned that shifting jurisdiction to the CFTC would allow prediction markets to offer the contracts to retail investors. Under the securities laws, security-based swaps are generally restricted to eligible contract participants unless they are sold pursuant to a registration statement on a national securities exchange. Better Markets argued that prediction markets want CFTC oversight specifically to avoid these retail investor restrictions and the SEC's broader investor protection mandate.

The group also argued that treating the contracts as securities preserves distinct oversight for insider trading, fraud, and manipulation, along with stricter limits on paid promotion. Without that treatment, Better Markets warned, prediction market advertising by influencers would become a free-for-all. Better Markets said the SEC has developed resources for market integrity that the CFTC cannot match, and warned that reclassifying the contracts would expose retail investors to products that blur the line between investing and gambling.