Citadel Securities has called on regulators to place oversight of prediction market contracts linked to publicly traded companies under the Securities and Exchange Commission (SEC) rather than the Commodity Futures Trading Commission (CFTC). The firm, in a letter dated Wednesday, September 9, 2026, argued that these contracts, often tied to key performance indicators (KPIs) of companies like Kroger's sales or United Airlines' passenger counts, should be classified as security-based swaps, thus falling within the SEC's jurisdiction.
According to Citadel Securities, the current regulatory framework, where the CFTC oversees these products, poses risks of market fragmentation and raises concerns about insider trading. Stephen Berger, Citadel Securities' global head of government and regulatory policy, highlighted that the SEC and equities exchanges possess extensive experience and surveillance capabilities to address such issues, having a long track record in investigating insider trading cases across equities, options, and related products.
The firm also criticized the CFTC's self-certification process, which allows trading venues to approve new products and begin trading them the next business day. In contrast, SEC-regulated venues undergo a more stringent formal review process, including public comment and affirmative SEC approval. Citadel Securities warned that the CFTC's process could be exploited by trading venues to circumvent SEC jurisdiction, and separately expressed concerns about equity-linked perpetual derivatives potentially pushing trading activity outside the SEC's oversight and investor protection frameworks.
Citadel Securities urged both agencies to reaffirm the SEC's authority over equity-linked products, prevent the use of self-certification to bypass this jurisdiction, and promptly clarify the regulatory treatment of event contracts and perpetual derivatives. This move comes as regulators grapple with a surge of novel prediction products that are increasingly intersecting with traditional markets, with both the SEC and CFTC having previously sought public input on the definitions of "swap" and "security-based swap."
