MoFo's Financial Markets & Innovation

New Congress Seeks Increased Oversight of Prediction Markets

According to news reports, the new Congress is planning increased scrutiny of prediction markets. Senator Jeff Merkley cited concerns about “bets on elections, war, assassinations, terrorism, and government actions that go against the public interest” and his belief in legislative action. In the last two weeks, both Representative Maxine Waters and Senator Elizabeth Warren, potentially the next leaders of the House Financial Services and Senate Banking Committees, expressed concerns about prediction markets. Before the midterms, Senator Warren and Senator John Curtis wrote a bipartisan letter to leading prediction markets on regulation of their election related markets.

SEC Announces Fiscal Year 2026 Enforcement Results

On November 10, the SEC released its yearly enforcement results for the fiscal year 2026, which included 235 standalone actions and 113 follow-on administrative proceedings. SEC Chairman Paul S. Atkins stated that the enforcement program’s success is measured by how effectively it “protects investors, holds wrongdoers accountable, and strengthens confidence in our markets.” The announcement also highlighted new retail fraud, financial reporting, and analytics initiatives, alongside Enforcement Manual revisions addressing the SEC’s Wells Process, settlement-related waiver requests, and cooperation credit.

CFTC Issues Impartial Access Interpretation

On November 5, the CFTC issued an interpretation of the impartial access requirement of designated contract markets (DCMs) under Commission Regulation 38.151(b). Chairman Michael Selig stated that derivative markets should operate at the national level, which makes “[g]eographic access restrictions … inconsistent” with the Commodity Exchange Act’s purposes and impartial access requirements. The CFTC directed DCMs to stop domestic geographic restrictions that violate impartial access requirements within 30 days or submit an explanation to the Division of Market Oversight for “why compliance is not feasible.” Within the same period, DCMs should review intermediaries accessing their markets for compliance with impartial access requirements or, if compliance is not feasible, submit an explanation to the CFTC.

CFTC Staff Addresses Trust Companies for Daily Settlements

On November 5, the CFTC Division of Clearing and Risk released a no-action letter on the use of trust companies for daily settlements. According to the announcement, a derivatives clearing organization may use a trust company if it “treats the trust company as if it were a settlement bank” under applicable CFTC requirements.

CFTC Chairman Announces Path for Equity Perpetual Futures

On November 3, CFTC Chairman Michael Selig announced perpetual futures contracts on individual equity securities could begin trading on qualifying CFTC-registered exchanges. The contracts may trade on designated contract markets that are also notice-registered with the SEC as national securities exchanges for security futures products. Selig said the new regulatory pathway to certain perpetual futures would allow American investors to access the products within the CFTC’s regulatory framework rather than through offshore or unregulated markets. He described equity perpetual futures as building on the Commodity Futures Modernization Act of 2000 and the agencies’ memorandum of understanding. Selig said the agencies were committed to providing “regulatory clarity for innovative products and a clear path to market,” rather than focusing on jurisdictional disputes.