Aug. 25, 2026
From: Robert Rutkowski Sent: Tuesday, August 25, 2026 12:26 PM To: Chairman Subject: Protecting Investors by Maintaining SEC Oversight of Event Contracts on Public Companies August 25, 2026 Securities and Exchange Commission 100 F Street, NE Washington, DC 20549 Commodity Futures Trading Commission Three Lafayette Centre 1155 21st Street, NW Washington, DC 20581 Re: Protecting Investors by Maintaining SEC Oversight of Event Contracts on Public Companies Dear Commissioners: I am writing to urge the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) to maintain clear regulatory boundaries between securities and commodities markets and, in particular, to ensure that event contracts tied to the key performance indicators (KPIs) and financial condition of individual publicly traded companies remain subject to the securities laws and the SEC's investor-protection framework. This issue has become increasingly important as prediction-market platforms seek to expand into contracts based on corporate events, including company revenues, customer numbers, product releases, vehicle deliveries, acquisitions, initial public offerings, and other issuer-specific metrics. Better Markets has appropriately warned that these products should not be shifted into the CFTC's jurisdiction merely because prediction-market platforms prefer the regulatory treatment available under that framework. The existing statutory and regulatory framework already provides a logical distinction. As Better Markets explained in its August 24, 2026 comment letter concerning the agencies' joint request for comment, a security-based swap includes a swap based on an event relating to a single issuer when that event directly affects the issuer's financial statements, financial condition, or financial obligations. Contracts tied to an individual company's quarterly revenue, customer thresholds, acquisitions, IPOs, product releases, or other issuer-specific activities can therefore fall squarely within the security-based-swap framework. The agencies should clarify and enforce this existing distinction rather than weaken it. Investor protection must come first Moving issuer-specific event contracts into a regulatory regime without the SEC's investor-protection mandate could expose retail investors to substantial risks. The SEC's securities framework provides important protections concerning insider trading, fraud, manipulation, market integrity, intermediary obligations, and misleading promotion. These safeguards are particularly important when a contract's value depends upon information about a specific public company-information that corporate insiders, employees, analysts, investors, and other market participants may possess at different times. There is also a fundamental concern regarding retail participation. As Better Markets notes, security-based swaps are generally subject to restrictions concerning eligible contract participants, while treating these products as ordinary swaps could allow substantially broader retail participation through prediction-market platforms. The agencies should not resolve this regulatory question by choosing the framework that permits the greatest retail access. They should choose the framework that provides appropriate investor protection for the product actually being offered. Do not allow regulatory arbitrage Prediction markets should not be permitted to obtain a more favorable regulatory environment by characterizing issuer-specific financial contracts as ordinary swaps when those contracts possess the characteristics of security-based swaps. If a contract is economically connected to a particular public company's financial condition, financial statements, or financial obligations, its regulatory treatment should reflect that reality. The regulatory classification should not depend upon the business model or preferred jurisdiction of the platform offering the contract. Permitting platforms to effectively select their regulator would create incentives for regulatory arbitrage and could undermine the carefully constructed division of responsibilities between the SEC and CFTC. The agencies' August 2026 request for comment recognizes that innovative financial products can implicate both regulatory regimes. That makes it even more important that the agencies establish and enforce principled boundaries rather than create special exceptions for rapidly expanding prediction-market businesses. Address manipulation, insider trading, and misleading promotion Issuer-specific event contracts also create unique risks because they can be influenced by information about a particular public company. For example, an event contract concerning whether a company will achieve a particular revenue target could be affected by nonpublic information. A contract concerning vehicle deliveries, a product launch, an acquisition, or an IPO could similarly create opportunities for individuals with privileged information to profit. The SEC's established expertise in addressing insider trading, securities fraud, manipulation, disclosure, and market integrity is therefore directly relevant. The agencies should also carefully consider the risks created by advertising and promotion. If issuer-specific contracts are made widely available to retail customers, aggressive marketing-including promotion through influencers-could encourage consumers to view highly speculative contracts as ordinary investments or entertainment without adequately understanding the risks. Better Markets specifically identifies the stronger restrictions applicable under the securities laws concerning promotion of financial products as an important investor protection. Keep the distinction between investing and gambling clear The growth of prediction markets presents a broader regulatory challenge. Financial markets and gambling markets are increasingly converging, and the distinction between investing, speculation, and wagering can become difficult for ordinary consumers to understand. That makes regulatory clarity more important-not less. The SEC and CFTC should not further blur the boundary by modifying the definitions of "swap" and "security-based swap" so that contracts that otherwise constitute security-based swaps can be offered under the less protective regulatory framework. Instead, the agencies should preserve the principle that products involving issuer-specific financial events should receive the protections appropriate to securities markets. Requested actions I respectfully urge the SEC and CFTC to: 1. Maintain the existing definitions of "swap" and "security-based swap" rather than creating special exemptions for prediction-market event contracts. 2. Clarify that event contracts based on specific public companies' KPIs and financial events generally constitute security-based swaps when the underlying event directly affects the issuer's financial statements, financial condition, or financial obligations. 3. Reject attempts to shift issuer-specific event contracts into the CFTC's jurisdiction solely to provide prediction-market platforms with a more favorable regulatory framework. 4. Require platforms offering products that qualify as security-based swaps to comply with the applicable SEC requirements, including restrictions and protections concerning retail participation. 5. Strengthen safeguards against insider trading, market manipulation, fraud, misleading advertising, and other abusive practices involving issuer-specific event contracts. 6. Ensure that exchanges and platforms accurately classify their products and do not mischaracterize security-based swaps as ordinary swaps to avoid applicable securities-law requirements. 7. Coordinate closely between the SEC and CFTC so that innovation does not become a vehicle for regulatory arbitrage or erosion of investor protections. Innovation in financial markets can be beneficial, but innovation does not justify abandoning established investor protections. When a product is tied directly to the financial performance or condition of a specific publicly traded company, the public deserves the protections of the securities laws. The SEC has the investor-protection mandate, expertise, and regulatory tools necessary to oversee these products. The CFTC likewise has an important role within its statutory jurisdiction. The solution is not to redraw regulatory boundaries simply because an emerging industry prefers one regulator over another. I therefore urge both Commissions to preserve the existing regulatory framework, clarify that issuer-specific KPI event contracts that meet the statutory definition of security-based swaps remain subject to SEC oversight, and put investor protection and market integrity ahead of the interests of prediction-market platforms seeking regulatory convenience. Thank you for your consideration of this important matter. Yours sincerely. Robert E. Rutkowski