CFTC Approves Registration for DCO to Process Event Contracts

The CFTC approved an application for registration filed by a trading startup that will let users bet on the outcome of future events (including elections).  

The CFTC granted the startup's application to run a clearinghouse that would process trades and settle up accounts between winning and losing bets. (See also, the applicant's homepage.) The CFTC said the startup "is permitted to clear, in its capacity as a registered DCO, fully collateralized positions in swaps," as long as it "meets the definition of 'fully collateralized position' in Commission [Rule] 39.2 ("Definitions")." In the Order, the CFTC also stated that "should the Commission promulgate or amend a regulation addressing or otherwise affecting any aspect of this Order, then such regulation will apply and supersede the applicable term(s) in this Order."

The approval comes after the startup sued the CFTC in November 2023 for blocking its effort to launch contracts tied to the outcome of US presidential elections. The lawsuit is still pending.

In a statement, Commissioner Caroline D. Pham highlighted a "renaissance in markets" driven by new technology that allows for direct access and continuous all-to-all trading. She pointed out that the ways participants can "buy, sell, or trade—and with who—is changing rapidly," creating new opportunities that are more accessible but come with risks. Ms. Pham emphasized the need for the CFTC to understand these shifts or be "left behind."