On June 12, the CFTC published a Notice of Proposed Rulemaking (Prediction Markets; Public Interest Determinations) setting out a potential framework to resolve many of the ongoing definitional and jurisdictional debates related to event contract markets. Last month, Rothera submitted a comment letter broadly supporting the proposal’s architecture while recommending several targeted refinements.

Many of our recommendations reflected the same underlying belief: event contracts should be evaluated based on durable, objective criteria related to compliance with regulations, contract design, and settlement criteria, not subjective opinions about their utility or merit of the underlying activity.

This area of the proposal is especially consequential because it is where broad statutory categories become practical regulatory boundaries. The Commodity Exchange Act identifies certain “enumerated activities,” including gaming, for special consideration. The proposal correctly recognizes that a contract involving one of those activities is not automatically prohibited under the “Special Rule.” Instead, the Commission may evaluate whether the contract is contrary to the public interest using factors tied to manipulation, settlement integrity, information misuse, and the structure of the underlying event.

That distinction matters. A contract’s category can tell regulators where closer examination may be warranted. It cannot, by itself, determine the outcome of that examination.

Sports contracts provide a useful example. A contract settling on the final result of a game, a team’s performance across a season, or a player’s aggregate statistics has a different risk profile, and distinct informational value, from one determined by a single pitch, foul, shot, or other discrete action. Both contracts concern sports, but they differ starkly in terms of how much control any one participant can exercise over the settlement outcome and their ability to draw information into the market.

The same principle applies more broadly. A sound public-interest analysis should begin with concrete, objective questions.

Can the outcome be determined objectively? Contract terms should identify authoritative, publicly verifiable data, establish clear fallback sources, and address predictable edge cases such as cancellations, schedule changes, corrections, and ties. Settlement integrity is not something to resolve only after a dispute arises. It should be built into the product before trading begins.

Is control over the outcome concentrated? Contracts based on cumulative or aggregate outcomes generally distribute determinative capacity across many participants and actions. Contracts that can be settled by the decision or conduct of one identifiable actor demand greater scrutiny.

What market structure surrounds the contract? In an exchange-traded, centrally cleared market like Rothera’s, participants trade against other participants. The exchange does not set odds, take the opposite side of trades, or hold a directional interest in the result. Positions are centrally cleared, intermediaries conduct customer diligence, and the exchange performs surveillance for manipulation, anomalous activity, and misuse of non-public information. These safeguards do not make every contract appropriate, but they materially affect the risks regulators are being asked to evaluate.

The proposal also recognizes that an event contract does not need to prove a specific economic purpose or utility before it may be permitted. That does not mean those functions are incidental. For Rothera, they represent the long-term promise of the category: markets that aggregate diffuse information into transparent prices and give businesses and investors new tools to make decisions and manage precisely defined risks. The point is that this value cannot always be demonstrated, or even fully anticipated, in advance. It often depends on liquidity, participation, and practical applications developing over time. Requiring proof at launch could stifle innovation and prevent promising markets from ever having the opportunity to mature.

For the same reason, the public-interest inquiry should not turn on subjective, idiosyncratic judgments about whether the underlying event is sufficiently important, serious, or worthwhile. Reasonable people may disagree about the social value of a given subject or activity. Regulation is more durable when it focuses instead on identifiable harms: manipulation, settlement ambiguity, concentrated control, market disruption, and misuse of information.

This is not an argument for permissiveness without boundaries. Some contract designs clearly warrant heightened scrutiny, and some may not be appropriate for listing. The point is that the boundaries should be connected to observable risk and applied consistently.

We believe the CFTC’s proposal provides clarity on a number of key points and definitions foundational to that kind of framework. A final rule that establishes clear definitions, preserves its factor-based structure, sharpens its objective standards, and recognizes the protections provided by regulated exchange and clearing infrastructure can support both market integrity and responsible innovation.

In a fast-developing category, that combination of rigor and practicality is not merely a compromise. It is the goal.

- Tom Chippas and Matt Trudeau, Co-Founders, Rothera