Citadel Securities has formally requested that the Securities and Exchange Commission (SEC) take over the oversight of prediction market contracts that are linked to publicly traded companies. This push comes as prediction markets experience rapid growth, and regulators are working to define the boundaries between swaps and security-based swaps. Citadel Securities argues that these equity-linked products, including contracts tied to key performance indicators (KPIs) of public companies, should fall under the SEC's jurisdiction, not the Commodity Futures Trading Commission (CFTC).
The firm expressed concerns that the CFTC's self-certification process for new products could be exploited by trading venues to bypass the SEC's regulatory authority. Unlike the SEC's formal review process, which involves public comment and affirmative approval, the CFTC allows new products to begin trading almost immediately after self-certification. Citadel Securities emphasized that innovation should not compromise the established regulatory framework of US securities markets.
Stephen Berger, Citadel Securities' global head of government and regulatory policy, highlighted that Congress established the existing regulatory framework to protect the integrity of underlying securities markets. He also raised the potential for insider trading, noting that the SEC and equities exchanges possess extensive experience and cross-market surveillance capabilities to investigate such activities. The firm is also concerned about equity-linked perpetual derivatives, fearing they could move trading activity outside the SEC's current surveillance and investor protection systems.
In a comment letter dated September 9, 2026, Citadel Securities urged both agencies to reassert SEC jurisdiction over equity-linked products. They also called for measures to prevent the self-certification process from being used to circumvent this jurisdiction and requested prompt clarification on the regulatory treatment of event contracts and perpetual derivatives.
