CFTC exemption Bitnomial reporting obligation! Event contracts clear regulatory hurdles

CFTC issues a no-action letter to Bitnomial, exempting event contracts from reporting requirements. Daily trading volume in prediction markets reaches tens of thousands, making individual transaction reporting impractical. Bitnomial needs to provide transparent data, with positions collateralized 1:1 to prevent leverage. Market trends reflect increased regulatory acceptance, with ICE investing $2 billion in Polymarket, and the largest compliant crypto exchange in the US acquiring The Clearing Company.

Significance of the No-Action Letter as a Regulatory Breakthrough

(Source: CFTC)

The U.S. Commodity Futures Trading Commission (CFTC) issued a no-action letter to crypto derivatives exchange Bitnomial on Thursday, clearing obstacles for the platform’s event contracts and prediction markets. The letter exempts Bitnomial from strict reporting requirements under current U.S. regulations for asset swaps. For active trading platforms like prediction markets, such restrictions are impractical, as they can see tens of thousands of swap transactions in a single day.

In traditional financial markets, asset swaps typically involve large, low-frequency institutional trades, with regulators requiring individual transaction reporting to monitor systemic risk. But prediction markets are fundamentally different: individual trades may only be a few dollars to hundreds of dollars, with extremely high frequency, and participants mostly retail investors. Requiring per-transaction reporting would make compliance prohibitively expensive, hindering operation. The exemption recognizes this difference, providing a tailored regulatory framework for this new financial product.

According to the letter, Bitnomial must still publish transparent consumer-facing data on its website, including timestamps and sales data for contracts, and provide relevant data upon CFTC request. All positions must be collateralized, meaning no leverage is allowed, and collateral must be provided on a 1:1 basis to ensure liquidity and prevent chain reactions of liquidations that could threaten the platform’s solvency.

This “exemption from reporting but with enhanced collateral” regulatory logic is highly intelligent. The no-action letter is not a complete laissez-faire approach but replaces traditional rules with a more suitable regulatory method for prediction markets. The 1:1 collateral requirement prevents leverage bubbles and systemic risk, while transparent data disclosure ensures market oversight. CFTC’s retention of data access rights maintains regulatory deterrence.

Three Key Provisions of the No-Action Letter

Exemption from individual transaction reporting: Reduces compliance costs by waiving strict asset swap reporting requirements

Mandatory transparency: Website must provide timestamps and sales data, with CFTC able to access data at any time

Prohibition of leveraged trading: All positions must be collateralized 1:1 to prevent chain liquidations and systemic risk

Explosive Growth of Prediction Markets in the US

This no-action letter reflects the increasing acceptance of prediction markets by U.S. regulators, as blockchain technology enables new financial applications beyond traditional infrastructure. Prediction markets saw significant development during the 2024 U.S. presidential election, with supporters claiming they can more accurately forecast election outcomes than polls.

Since then, platforms like Polymarket and Kalshi have attracted more institutional investors and gradually entered mainstream culture. In September 2025, Kalshi and Polymarket appeared in an episode of the long-running satire “South Park,” involving major news events and cultural trends. The following month, Intercontinental Exchange (ICE), owner of the NYSE, invested $2 billion in Polymarket at a valuation of $9 billion. This mainstream financial institution investment signals a shift of prediction markets from fringe to center stage.

In December, the largest compliant crypto exchange in the US agreed to acquire The Clearing Company, a startup in prediction markets, as part of its strategy to enter this space. The deal is expected to close in January 2026, a midterm election year in the US, when trading volume in prediction markets could surge as the election season begins. The entry of the largest compliant crypto exchange will bring millions of retail users and regulatory expertise to prediction markets.

For Bitnomial, a CFTC-regulated crypto derivatives exchange, obtaining the no-action letter is highly significant. It’s not only a boon for Bitnomial but also a policy signal for the entire prediction market industry. If the CFTC is willing to grant regulatory exemptions for event contracts, it indicates recognition of the legitimacy and social value of this new financial product.

2026 Midterm Elections to Trigger Prediction Market Boom

2026 will be a midterm election year in the US, with trading volume in prediction markets likely to increase significantly as the election season begins. During the 2024 presidential election, trading volumes on Polymarket and Kalshi hit record highs, demonstrating the appeal of prediction markets for major political events. While midterms attract less attention than presidential elections, they still involve all 435 House seats and 33 Senate seats, keeping market interest high.

Bitnomial’s timing in obtaining the CFTC no-action letter is very strategic, just ahead of the 2026 election cycle. This allows it to establish market infrastructure, test products, and build a user base before competitors. If Bitnomial can launch attractive event contracts before the midterms, it could capture market share from Kalshi and Polymarket.

From a broader perspective, the policy shift by the CFTC signals a move from skepticism to acceptance of prediction markets in the US. The pro-crypto stance of the Trump administration, combined with the success of prediction markets in 2024, has encouraged regulators to support innovation. This policy tailwind will attract more capital and talent into the prediction market space, fueling industry growth toward a breakout in 2026.

Overall, the CFTC’s issuance of a no-action letter to Bitnomial clears key regulatory hurdles for the development of event contracts and prediction markets in the US. The collateral and transparency provisions protect investors while allowing room for innovation. The 2026 midterm elections will serve as a testing ground, with competition among Bitnomial, Kalshi, Polymarket, and the largest compliant crypto exchange reshaping this emerging industry.