S4469-119

What This Bill Does

The Prediction Market Act of 2026 amends the Commodity Exchange Act to create special federal rules for event contracts. It defines a contingency as an event or circumstance that may happen but is not certain, an event contract as a futures contract, option, or swap based on excluded commodities and an occurrence or contingency that is listed by a designated contract market or swap execution facility, and an occurrence as something that happens. The Commodity Futures Trading Commission may decide case by case that an event contract is contrary to the public interest if it is based on unlawful activity, terrorism, assassination, war, violence, gaming, or similar activity. Contracts found contrary to the public interest may not be listed or cleared. CFTC must issue public-interest criteria after at least a 60-day comment period and must treat contracts as likely contrary to the public interest if they materially encourage violence or similar unlawful activity.

The bill requires CFTC rules for enhanced event-contract certification formats, retail-readable disclosures, and possible financial penalties and appeals for certification-format violations. It restricts promotional materials used by derivatives clearing organizations when offering event contracts to retail customers. Promotional material may not deceive the public, omit material facts, mention profit without an equally prominent risk-of-loss discussion, cite past profits without warning that past results do not indicate future results, use certain performance statistics unless permitted by CFTC rule, or use misleading testimonials. CFTC must issue related rules, record-examination requirements, and penalties. Derivatives clearing organizations offering retail event contracts must maintain Bank Secrecy Act anti-money-laundering programs, responsible officers, ongoing training, independent testing, customer due diligence, suspicious-transaction monitoring, beneficial-owner identification, and age-18 verification. CFTC must also issue rules on customer fund segregation, risk disclosures by futures commission merchants, designated contract markets, and swap execution facilities, and separate default treatment for fully collateralized contracts versus leveraged contracts.

The bill creates an Advisory Council on Consumer Protection within 90 days. Its 15 members include the Retail Advocate, at least three state attorneys general, experts in behavioral science and health, financial risk, and consumer finance, and representatives from CFTC's Office of Customer Education and Outreach, DOJ, state and local law enforcement, state and local regulators, market operators, and market participants. The council must meet at least every 120 days, advise CFTC and Congress, identify retail protection gaps, assess self-exclusion and voluntary deposit or trade limits, review retail customer profiles, study behavioral prompts and marketing features, evaluate mobile and personal device use, submit an initial report within 180 days, and submit twice-yearly reports thereafter. CFTC must review the council's findings and publish an assessment.

The bill establishes an Office of the Retail Advocate within CFTC. The Retail Advocate reports directly to the Commission, is appointed by the chairman, is paid like other senior executives reporting to the chairman, helps retail participants resolve significant transaction problems, analyzes proposed regulations, recommends regulatory or order changes, researches retail participant issues, and assists the Office of Customer Education and Outreach. The Retail Advocate and staff may access CFTC documents needed for their functions but may not access or disclose proprietary or sensitive market data beyond statutory limits, and the Office must publish confidentiality policies. The Retail Advocate must submit annual reports to Congress. Within 180 days after the first Retail Advocate is appointed, the Retail Advocate must appoint an Ombudsman to liaise with retail participants, review policies encouraging compliance questions, safeguard communications, and report annually. The bill preserves state investigative and enforcement authority and CFTC jurisdiction.

The bill separately bans Members of Congress, the President, Vice President, and senior executive branch officials paid under Executive Schedule levels I through V from entering into event contracts. CFTC must issue implementing rules, decide whether insider-trading rules should require designated contract markets, swap execution facilities, and futures commission merchants to adopt enhanced event-contract detection and deterrence measures, implement any needed revisions, and conduct retail event-contract financial literacy and customer education through the Office of Customer Education and Outreach.

The bill creates an Innovation Advisory Committee to advise CFTC on innovation in derivatives and commodity markets. CFTC appoints members representing a broad spectrum of interests, including market makers, derivative end-users, futures commission merchants, and market operators. The committee must hold public meetings at least twice a year, submit reports and recommendations, serve three-year terms, receive travel reimbursements, be exempt from chapter 10 of title 5, and may be terminated by CFTC. CFTC must study event-contract market size, structure, listings, liquidity, contract categories, unique conduct risks, and cross-border antifraud and antimanipulation provisions, with a report within one year. CFTC and SEC must jointly study possible SEC jurisdiction, harmonization, and decentralized blockchain applications for event contracts, with a report within 15 months. The bill authorizes $30 million per fiscal year for 2027 through 2031 for CFTC to implement the Act, write event-contract policies, conduct oversight, rulemakings, studies, Retail Advocate operations, and build surveillance and data analysis capabilities.

Who Benefits and How

Retail event-contract participants benefit because the bill creates rules for truthful promotional materials, readable disclosures, AML and customer due diligence, age verification, fund segregation, risk disclosures, an Advisory Council on Consumer Protection, a Retail Advocate, an Ombudsman, annual reports, consumer education, and research on retail harms. CFTC benefits from explicit event-contract authority, new offices and advisory bodies, studies, rulemaking mandates, surveillance and data-analysis funding, and $30 million per year for fiscal years 2027 through 2031. Designated contract markets, swap execution facilities, derivatives clearing organizations, futures commission merchants, market makers, market operators, derivative end-users, and blockchain application developers benefit from a clearer federal framework, advisory channels, studies, and potential market legitimacy, although they also face new compliance duties. State attorneys general, state regulators, DOJ, Congress, and state law enforcement benefit from formal advisory or reporting channels and from preservation of state enforcement authority.

Who Bears the Burden and How

CFTC bears the largest administrative burden because it must write public-interest, certification, disclosure, promotional-material, AML, fund-segregation, insider-trading, and event-contract oversight rules; review event contracts; impose and administer penalties; establish the Advisory Council, Office of the Retail Advocate, Retail Advocate, and Ombudsman; publish assessments; conduct studies; run customer education; and build surveillance and data-analysis capabilities. Designated contract markets, swap execution facilities, derivatives clearing organizations, and futures commission merchants must comply with certification, disclosure, promotional, AML, customer due diligence, age-verification, fund-segregation, risk-disclosure, detection, deterrence, recordkeeping, discipline, and reporting requirements. Members of Congress, the President, the Vice President, and senior executive branch officials are barred from entering event contracts. Event contracts based on unlawful activity, terrorism, assassination, war, violence, gaming, or similar activity bear listing and trading prohibitions. Federal taxpayers bear costs from the $30 million per year authorization for fiscal years 2027 through 2031.

Key Provisions

• Defines event contracts and gives CFTC case-by-case authority to block contracts contrary to the public interest, including contracts based on unlawful activity, terrorism, assassination, war, violence, gaming, or similar activity.
• Requires CFTC public-interest criteria, enhanced certification formats, retail-readable disclosures, possible financial penalties and appeals, and at least 60 days of public comment on the public-interest rules.
• Restricts retail promotional materials, requires AML programs, customer due diligence, suspicious-transaction monitoring, beneficial-owner checks, age-18 verification, fund-segregation rules, risk disclosures, and separate default treatment for fully collateralized contracts.
• Establishes an Advisory Council on Consumer Protection, an Office of the Retail Advocate, a Retail Advocate, and an Ombudsman for retail participant issues, consumer-protection recommendations, confidentiality policies, and annual reports.
• Bars Members of Congress, the President, the Vice President, and senior executive branch officials from entering event contracts and directs CFTC to update insider-trading detection and deterrence rules as needed.
• Creates an Innovation Advisory Committee for derivatives and commodity market innovation, with market makers, derivative end-users, futures commission merchants, and market operators represented.
• Requires CFTC event-contract studies, a CFTC-SEC joint study on SEC jurisdiction, harmonization, and blockchain event-contract applications, and public reports within one year and 15 months.
• Authorizes $30 million per year for fiscal years 2027 through 2031 for CFTC implementation, event-contract rules and guidance, oversight, studies, Retail Advocate operations, surveillance, and data analysis.