Securities Regulation Daily Wrap Up, DERIVATIVES—CFTC staff letter reminds DCMs of obligations and expectations when self-certifying incentive programs, (Aug 13, 2026)

By Rebecca E. Hoffman, J.D.

The CFTC’s press release indicated that submissions have been deficient lately, particularly for event contracts.

An August 12 advisory from the CFTC’s Division of Market Oversight, addresses designated contract markets’ self-certification for “market-maker, liquidity, trading, or incentive programs,” focusing on prediction markets. The staff letter’s purpose is to remind DCMs of their obligations under Commission Regulations 40.5 and 40.6, and to ensure that programs align with the DCM Core Principles (Staff Advisory on Self-Certification of Incentive Programs for Prediction Markets, CFTC Letter No. 26-23 (Aug. 12, 2026)).

“This advisory addresses concerns regarding an increasing number of incentive program rule filings submitted under CFTC Regulation 40.6(a)—particularly those relating to event contract products—that contain procedural or substantive deficiencies,” the CFTC explained in a press release. The Division acknowledged that such programs benefit the market provided they are “properly designed.”

Self-certification process. Self-certification submissions, containing the rules that govern the program at issue and an assessment of the program’s compliance with the Commodity Exchange Act, regulations, and Core Principles, are reviewed for 10 business days before the program can commence. Deficient filings can defeat the purpose of the streamlined self-certification process, the letter said, by necessitating requests for more information and resubmissions and extending the time required for review.

The letter explained that a DCM wishing to update or amend an existing program must submit a new filing explaining the changes. Changes to pending filings require that the filing be withdrawn in favor of a new submission. The Commission may request more information, seek modifications, or stay the launch of the program if information is missing or if more time is needed to review the filing.

Avoiding fraud, abuse, disruptions. The Core Principles and regulations provide that DCMs must have procedures in place to “ensure market integrity and protect participants from fraudulent, abusive, or manipulative conduct” around these programs. A DCM must determine the risks and design the program to avoid them. They must also steer clear of “disproportionate or unlimited payouts,” such as unlimited rebates. Monitoring to prevent market disruptions is also key, the letter said, encouraging DCMs to set up alerts based on the type of program.

The Division also reminded DCMs of their obligation to provide impartial access to their offerings. “[A]ccess to a DCM should be based on the financial and operational soundness of a participant, not on factors that could result in discriminatory access or act as a barrier to entry.” It noted that “informal perks, such as VIP or early access” without explicit disclosure could contravene this requirement.

The staff emphasized that this advisory does not create any rights or new rules but is meant to aid DCMs in improving their submissions, which in turn will “facilitate Commission review and help ensure that programs operate in a manner consistent with the Act and Commission regulations.”

An appendix provides specific guidance for what to include in a filing. Requirements include specific start dates for programs, specific economic terms, and an “evaluation of the program’s impact on Core Principle compliance, including risks related to market manipulation, abusive trading, impartial access, fairness, competition, and market integrity.”

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