Exchange heads call for consistency in CFTC approach to new contracts

Speaking at the inaugural Innovation Advisory Committee meeting at the CFTC on Thursday, the chief executive officer of Cboe Global Markets highlighted the ability of prediction market venues to list contracts through the regulator on what should be categorised as securities, when there were pre-existing instruments listed on the separate Securities and Exchange Commission (SEC) framework.

“Our job I think as an industry is to promote responsible innovation and fair competition, and it is to effectuate safety and soundness and customer protection,” Donohue (pictured) said. “We can’t do that when we blur the lines on what is black and white – there is a limit. There is a limit to what the regulators can do, they are bound by the law, they are bound by what Congress has done, and more importantly in securities markets they are boundaried by the fact that there isn’t exhaustive Federal pre-emption of securities laws.

“They are regulated to some degree by the States, and so when you have securities products that are unregistered trading on a DCM, no matter what the regulators want to do, at some point there is going to be litigation. At some point there will be rescission exercised by customers on those platforms – at the State level or at the Federal level – because they can do it both ways. Those are risks that don’t promote safety and soundness, they don’t protect customers.”

Donohue has consistently called for action on this issue, saying the ability to “self-certify” contracts allows firms to list instruments that should be categorised as securities.

Speaking at the same event, CME chairman and chief executive Terry Duffy also said that some prediction contracts risk violating rules against listing contracts on markets that are susceptible to manipulation - Core Principle 3 of the designated contract market (DCM) rules.

“There have been 2500 self-certifications since this administration took office in January of 2025, of which none have been opposed,” Duffy said. “There have been a lot of self-certifications around products that are in violation of Core Principle 3. There’s no doubt about it, and if you don’t think that’s true then you don’t watch the news… [there] are definitely people that are manipulating these contracts. That is not good for our industry. That is horrible for our industry, we are not a bunch of carnival barkers at a circus.

“We are running the most envied markets in the world here in the United States of America. Chair Selig and President Trump have said how they want to make America the crypto capital of the world. Well we don’t want to chase our own participants out of our own markets either, and in listing markets that are susceptible to manipulation, we are really doing the opposite of what we’re trying to effectuate.”

The CFTC in July paused the CME’s own self-certification for a 24/7 contract on crude oil futures. Duffy said that it was critical that regulated exchanges are able to compete with offshore exchanges as novel contracts begin to affect pricing on traditional venues.

“They are have an impact on markets, but yet we are being held up, others are being held up, Kalshi is being held up on trying to list 24/7 markets,” he added. “Some people like them, some people hate them, I think all markets are going 24/7. I do believe that, that’s just a matter of time.

“The banking system’s got to get there, the Federal government’s got to get there, and we will get there. But I think it is truly important that we don’t have double standards.”