U.S. derivatives regulator the Commodity Futures Trading Commission issued a narrow no-action letter that gives Bitnomial Exchange and its clearing affiliate relief from strict swap reporting and recordkeeping requirements. The move, announced Thursday, provides regulatory clarity for “event contracts” and opens the door for regulated prediction markets in the United States. Under the letter published Jan. 8, the CFTC’s Division of Market Oversight and the Division of Clearing and Risk said they will not recommend enforcement action against Bitnomial Exchange LLC, a designated contract market, or Bitnomial Clearinghouse LLC, a registered derivatives clearing organization, if they offer certain contracts without following some reporting rules that normally apply to swaps. The relief affects reporting obligations under Parts 43 and 45 of CFTC regulations, which require detailed data submissions to swap data repositories. Those rules, designed for traditional derivatives markets, can be impractical for event contracts that settle quickly and trade with high frequency. CFTC officials said the no-action stance applies only in the narrow circumstances outlined in the letter, and it is similar to relief granted to other regulated markets offering similar products. The agency did not change the underlying law or broadly exempt event contracts from regulation. Bitnomial must meet conditions to qualify for the relief. All event contracts must be fully collateralized with one-to-one backing and cleared through Bitnomial’s registered clearinghouse. This requirement aims to prevent leveraged positions that could strain market stability. The exchabge must also publish transparent trading data, including timestamps, sale prices, and execution details for event contracts on its public website. In addition, Bitnomial must provide transaction information to the CFTC on request and maintain records for inspection. The letter does not shield Bitnomial from other regulatory obligations. The exchange and clearinghouse must continue to comply with applicable Commodity Exchange Act requirements and CFTC rules outside the narrow relief. The divisions also reserved the right to modify, suspend, or terminate the no-action position if conditions change. Shift in U.S. Regulatory Approach Regulators and market participants see the decision as part of a broader trend to adapt oversight to new financial products tied to digital assets and event outcomes. Prediction markets, where traders take positions on real-world events have expanded rapidly in recent years, gaining attention during the 2024 U.S. election cycle for their market-based forecasts. Before this relief, platforms seeking to offer prediction or event contracts faced uncertainty under swap reporting regimes that were not designed for high-velocity trading. The CFTC’s letter signals that federal regulators may be more open to supervising such markets under tailored conditions, rather than forcing them into frameworks built for traditional futures or options. Some competitors already operate similar products under related no-action stances. The narrower scope of the Bitnomial relief means it does not set broad policy but does create a reference point for other regulated venues exploring event-based contracts. Market observers said the decision could attract traders and institutions that previously avoided offshore or loosely regulated markets due to compliance risks. By offering federally supervised event contracts, Bitnomial may provide a regulated alternative for U.S. participants in this emerging space
