[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"blog-post-prediction-markets-conflicts-and-affiliations":3},{"post":4,"related":191},{"id":5,"slug":6,"title":7,"excerpt":8,"body_markdown":9,"category":10,"tags":11,"hero_image_url":14,"author_id":15,"author_name":16,"read_minutes":17,"published":18,"published_at":19,"view_count":20,"meta_description":8,"meta_keywords":15,"created_at":21,"updated_at":22,"source":12,"external_url":15,"blocks":23,"sources":185,"canonical_url":190,"current_to":86},"32116c73-f5b8-47ad-a11d-d12f4475ebf9","prediction-markets-conflicts-and-affiliations","Prediction markets: the CFTC’s proposal on affiliated market makers","The CFTC has proposed rules for exchanges whose own affiliate trades on them, and it names prediction markets as the place the question matters most. What the proposal would require, what one exchange’s rulebook says today, and how to comment by October 5, 2026.","In a notice published in the Federal Register on August 6, 2026, the Commodity Futures Trading Commission proposed rules for exchanges, clearinghouses and brokers that share an owner. For prediction markets the part that matters is narrower: what an exchange must do when a firm under common control trades on it for its own account, usually as a market maker. Comments are due October 5, 2026.\n\n> The Commission notes that the exchanges with affiliated market makers have implemented a variety of measures to address potential concerns regarding these relationships. … This conflict has acquired practical significance with the emergence of affiliated structures, particularly in prediction markets. In these markets, the affiliate principal trading firm may serve as a significant source of liquidity on the affiliated exchange.\n>\n> — [CFTC, Conflicts and Affiliations (proposed rule), 91 Fed. Reg. 50926 (Aug. 6, 2026), preamble §§ I.F.iii and III.B.i](https:\u002F\u002Fwww.federalregister.gov\u002Fdocuments\u002F2026\u002F08\u002F06\u002F2026-15948\u002Fconflicts-and-affiliations)\n\nThe Commission names prediction markets as the setting, and records that exchanges already have their own safeguards. The question is which safeguards become rules.\n\n## What an exchange’s own rulebook says today\n\nKalshi’s rulebook permits an affiliate to trade on its exchange, and sets out the terms: the affiliate is a member, it gets no non-public information, and it is operationally separate. It also says what the affiliate does and what other participants should expect from it:\n\n> The Company has ensured the Affiliate does not have access to the Company’s material non-public information, and the Company ensures the Affiliate’s access to information is limited to public information available to all Members. … The Affiliate participates on the Platform and provides liquidity to the Platform by placing orders on either (or both) sides of a market at competitive price levels. … The Affiliate has no obligation to trade all or even any contracts at any time, and other Participants should not rely on the potential presence of the Affiliate to make markets or otherwise augment or provide liquidity in any contract.\n>\n> — [KalshiEX LLC DCM Rulebook v1.29, Rule 2.12(b) and (e)](https:\u002F\u002Fkalshi-public-docs.s3.amazonaws.com\u002Fregulatory\u002Frulebook\u002FKalshi%20DCM%20Rulebook%20v.1.29.pdf)\n\nInformation separation and disclosure are already in the rulebook. The proposal would add conditions on how the affiliate trades.\n\n[Video: Kalshi’s public regulatory documents page: the Exchange Rulebook v1.29 dated August 17, 2026, the version quoted above, beside the DCO Rulebook, with links for product certifications and the Liquidity Provider Program.](https:\u002F\u002Fwww.apparentlylaw.com\u002Fresearch-media\u002Fderivatives-kalshi-regulatory-rulebook.mp4)\n\n## What the proposal would require\n\nProposed § 38.852 lets a designated contract market keep an affiliate market maker, on conditions. The first changes the order in which trades fill:\n\n> Specifically, the designated contract market's trade matching system shall fill the bid or offer of any unaffiliated member before the bid or offer of the affiliate market maker at the same price, without regard to the time priority of the affiliate principal trading firm's order. The bids and offers of the affiliate principal trading firm shall be filled last at every price level\n>\n> — [Proposed 17 CFR 38.852(c)(1)(i)](https:\u002F\u002Fwww.federalregister.gov\u002Fdocuments\u002F2026\u002F08\u002F06\u002F2026-15948\u002Fconflicts-and-affiliations)\n\nAt the same price, every unaffiliated order fills first, however early the affiliate’s order arrived.\n\nThe second governs the affiliate’s market-making terms. Any market-maker or incentive program filed with the Commission that covers the affiliate must spell out its obligations on terms no less favorable to the exchange than those offered to unaffiliated firms, and must include quoting duties and a limit on directional positions:\n\n> Require an affiliate market maker to maintain continuous two-sided quotations in each product in which it is obligated to make a market; … the affiliate market maker does not make bids or offers, or enter into transactions, inconsistent with that purpose, including by taking directional proprietary positions other than in connection with its obligation to maintain two-sided quotations.\n>\n> — [Proposed 17 CFR 38.852(c)(1)(ii)(A) and (D)](https:\u002F\u002Fwww.federalregister.gov\u002Fdocuments\u002F2026\u002F08\u002F06\u002F2026-15948\u002Fconflicts-and-affiliations)\n\nCompare the rulebook above: today the affiliate has no obligation to trade. Under the proposal an affiliate that trades takes on quoting duties and may not take directional positions.\n\nTwo more conditions follow. An independent third-party regulatory service provider would monitor the affiliate and certify compliance to the Commission every year. And customers would be told, every session, before their first order:\n\n> (iii) Disclose the conditions and limitations imposed on the affiliate market maker under this section, including that the affiliate market maker's orders are filled after those of unaffiliated members at the same price; and (iv) Not be capable of being dismissed without the customer's affirmative acknowledgment. (v) The designated contract market shall require, by rule, that its intermediary participants and any other person operating an electronic interface through which customers enter orders deliver the notice in accordance with this paragraph (c)(3).\n>\n> — [Proposed 17 CFR 38.852(c)(3)](https:\u002F\u002Fwww.federalregister.gov\u002Fdocuments\u002F2026\u002F08\u002F06\u002F2026-15948\u002Fconflicts-and-affiliations)\n\nThe notice reaches past the exchange: a broker or app through which customers enter orders on the exchange would deliver it too.\n\n[Video: Kalshi’s sports page with no account: game contracts priced as percentages, and the order ticket beside them, with Yes and No prices, ending in a sign-up button.](https:\u002F\u002Fwww.apparentlylaw.com\u002Fresearch-media\u002Fkalshi-sports-board.mp4)\n\n## What the Commission did not propose\n\n> The Commission preliminarily declined to propose a flat prohibition because, as discussed above, a bona fide market maker can supply liquidity that unaffiliated firms may not, particularly across the broad and continually refreshed contract universes characteristic of prediction markets. … The Commission requests comment on whether it should instead adopt a prohibition on affiliate principal trading firms with no exception.\n>\n> — [CFTC, Conflicts and Affiliations (proposed rule), “Alternatives Considered”](https:\u002F\u002Fwww.federalregister.gov\u002Fdocuments\u002F2026\u002F08\u002F06\u002F2026-15948\u002Fconflicts-and-affiliations)\n\nThe proposal sits between two alternatives the Commission put out for comment: disclosure and procedures alone, and a flat ban. It also asks about a cap on the affiliate’s volume.\n\nThe same proposal covers swap execution facilities and clearinghouses with affiliates, bars a self-regulatory organization from acting as the designated examiner of its own affiliated futures commission merchant, and would require at least 35 percent public directors on an exchange’s board. It is a proposal: nothing in it binds anyone until the Commission adopts a final rule.\n\n## What a builder does with this\n\n- If you run, or plan, an exchange with an affiliated market maker: decide now whether the design works with the affiliate filled last at every price and quoting two-sided markets under the terms of any filed program, and budget for an independent monitor and an annual certification.\n- If you distribute a partner exchange’s contracts through your own app: plan for a per-session notice customers must acknowledge before their first order, delivered in your interface.\n- If you are choosing a partner exchange: ask whether it has an affiliate that trades, what its rulebook says about that affiliate, and how it would meet § 38.852 if adopted.\n- If the proposal affects your product: comments are due October 5, 2026, identified by “Conflicts and Affiliations” and RIN 3038-AF76, through Regulations.gov or the “Submit A Public Comment” button on the Federal Register page.\n\n[Video: The Federal Register page for the proposal on October 1, 2026: the banner giving the comment deadline of October 5, 2026 beside the Submit A Public Comment button, then the summary, the dates and the Regulations.gov instructions for filing a comment.](https:\u002F\u002Fwww.apparentlylaw.com\u002Fresearch-media\u002Fcftc-conflicts-comment-page.mp4)\n\n## Sources\n\n- [CFTC, “Conflicts and Affiliations,” Notice of proposed rulemaking, 91 Fed. Reg. 50926 (Aug. 6, 2026), RIN 3038-AF76 (full text)](https:\u002F\u002Fwww.federalregister.gov\u002Fdocuments\u002F2026\u002F08\u002F06\u002F2026-15948\u002Fconflicts-and-affiliations)\n- [KalshiEX LLC, DCM Rulebook v1.29 (file dated Aug. 17, 2026), Rule 2.12](https:\u002F\u002Fkalshi-public-docs.s3.amazonaws.com\u002Fregulatory\u002Frulebook\u002FKalshi%20DCM%20Rulebook%20v.1.29.pdf)","regulatory_update",[12,13],"apparently_law","prediction","https:\u002F\u002Fwww.apparentlylaw.com\u002Fresearch-media\u002Fderivatives-kalshi-regulatory-rulebook.jpg",null,"K. Aaron Pasch, CFA, JD",5,true,"2026-10-02T12:00:00+00:00",4,"2026-10-02T15:00:01.396902+00:00","2026-10-03T01:00:01.133+00:00",[24,27,51,54,56,78,88,90,92,102,104,120,122,138,146,148,168,170,172,179],{"text":25,"type":26},"In a notice published in the Federal Register on August 6, 2026, the Commodity Futures Trading Commission proposed rules for exchanges, clearinghouses and brokers that share an owner. For prediction markets the part that matters is narrower: what an exchange must do when a firm under common control trades on it for its own account, usually as a market maker. Comments are due October 5, 2026.","p",{"url":28,"kind":29,"note":30,"text":31,"type":32,"source":33,"segments":34,"highlights":50},"https:\u002F\u002Fwww.federalregister.gov\u002Fdocuments\u002F2026\u002F08\u002F06\u002F2026-15948\u002Fconflicts-and-affiliations","regulator","The Commission names prediction markets as the setting, and records that exchanges already have their own safeguards. The question is which safeguards become rules.","The Commission notes that the exchanges with affiliated market makers have implemented a variety of measures to address potential concerns regarding these relationships. … This conflict has acquired practical significance with the emergence of affiliated structures, particularly in prediction markets. In these markets, the affiliate principal trading firm may serve as a significant source of liquidity on the affiliated exchange.","excerpt","CFTC, Conflicts and Affiliations (proposed rule), 91 Fed. Reg. 50926 (Aug. 6, 2026), preamble §§ I.F.iii and III.B.i",[35,38,40,42,44,46,48],{"mark":36,"text":37},false,"The Commission notes that the exchanges with affiliated market makers ",{"mark":18,"text":39},"have implemented a variety of measures",{"mark":36,"text":41}," to address potential concerns regarding these relationships. … This conflict has acquired practical significance with the emergence of affiliated structures, ",{"mark":18,"text":43},"particularly in prediction markets",{"mark":36,"text":45},". In these markets, the affiliate principal trading firm may serve as ",{"mark":18,"text":47},"a significant source of liquidity on the affiliated exchange",{"mark":36,"text":49},".",[43,47,39],{"text":52,"type":53},"What an exchange’s own rulebook says today","h2",{"text":55,"type":26},"Kalshi’s rulebook permits an affiliate to trade on its exchange, and sets out the terms: the affiliate is a member, it gets no non-public information, and it is operationally separate. It also says what the affiliate does and what other participants should expect from it:",{"url":57,"kind":58,"note":59,"text":60,"type":32,"source":61,"segments":62,"highlights":77},"https:\u002F\u002Fkalshi-public-docs.s3.amazonaws.com\u002Fregulatory\u002Frulebook\u002FKalshi%20DCM%20Rulebook%20v.1.29.pdf","operator-terms","Information separation and disclosure are already in the rulebook. The proposal would add conditions on how the affiliate trades.","The Company has ensured the Affiliate does not have access to the Company’s material non-public information, and the Company ensures the Affiliate’s access to information is limited to public information available to all Members. … The Affiliate participates on the Platform and provides liquidity to the Platform by placing orders on either (or both) sides of a market at competitive price levels. … The Affiliate has no obligation to trade all or even any contracts at any time, and other Participants should not rely on the potential presence of the Affiliate to make markets or otherwise augment or provide liquidity in any contract.","KalshiEX LLC DCM Rulebook v1.29, Rule 2.12(b) and (e)",[63,65,67,69,71,73,75],{"mark":36,"text":64},"The Company has ensured the Affiliate does not have access to the Company’s material non-public information, and the Company ensures the Affiliate’s access to information is ",{"mark":18,"text":66},"limited to public information available to all Members",{"mark":36,"text":68},". … The Affiliate participates on the Platform and ",{"mark":18,"text":70},"provides liquidity to the Platform",{"mark":36,"text":72}," by placing orders on either (or both) sides of a market at competitive price levels. … The Affiliate has ",{"mark":18,"text":74},"no obligation to trade all or even any contracts at any time",{"mark":36,"text":76},", and other Participants should not rely on the potential presence of the Affiliate to make markets or otherwise augment or provide liquidity in any contract.",[66,70,74],{"src":79,"url":80,"type":81,"poster":14,"caption":82,"product":83,"seconds":84,"operator":85,"recorded":86,"recordedFrom":87},"https:\u002F\u002Fwww.apparentlylaw.com\u002Fresearch-media\u002Fderivatives-kalshi-regulatory-rulebook.mp4","https:\u002F\u002Fkalshi.com\u002Fregulatory\u002Frulebook","demo","Kalshi’s public regulatory documents page: the Exchange Rulebook v1.29 dated August 17, 2026, the version quoted above, beside the DCO Rulebook, with links for product certifications and the Liquidity Provider Program.","Regulatory documents page",25,"Kalshi","2026-10-01","Public page, no account; headless browser; recorded from New York",{"text":89,"type":53},"What the proposal would require",{"text":91,"type":26},"Proposed § 38.852 lets a designated contract market keep an affiliate market maker, on conditions. The first changes the order in which trades fill:",{"url":28,"kind":29,"note":93,"text":94,"type":32,"source":95,"segments":96,"highlights":101},"At the same price, every unaffiliated order fills first, however early the affiliate’s order arrived.","Specifically, the designated contract market's trade matching system shall fill the bid or offer of any unaffiliated member before the bid or offer of the affiliate market maker at the same price, without regard to the time priority of the affiliate principal trading firm's order. The bids and offers of the affiliate principal trading firm shall be filled last at every price level","Proposed 17 CFR 38.852(c)(1)(i)",[97,99],{"mark":36,"text":98},"Specifically, the designated contract market's trade matching system shall fill the bid or offer of any unaffiliated member before the bid or offer of the affiliate market maker at the same price, without regard to the time priority of the affiliate principal trading firm's order. The bids and offers of the affiliate principal trading firm shall be ",{"mark":18,"text":100},"filled last at every price level",[100],{"text":103,"type":26},"The second governs the affiliate’s market-making terms. Any market-maker or incentive program filed with the Commission that covers the affiliate must spell out its obligations on terms no less favorable to the exchange than those offered to unaffiliated firms, and must include quoting duties and a limit on directional positions:",{"url":28,"kind":29,"note":105,"text":106,"type":32,"source":107,"segments":108,"highlights":119},"Compare the rulebook above: today the affiliate has no obligation to trade. Under the proposal an affiliate that trades takes on quoting duties and may not take directional positions.","Require an affiliate market maker to maintain continuous two-sided quotations in each product in which it is obligated to make a market; … the affiliate market maker does not make bids or offers, or enter into transactions, inconsistent with that purpose, including by taking directional proprietary positions other than in connection with its obligation to maintain two-sided quotations.","Proposed 17 CFR 38.852(c)(1)(ii)(A) and (D)",[109,111,113,115,117],{"mark":36,"text":110},"Require an affiliate market maker to maintain ",{"mark":18,"text":112},"continuous two-sided quotations",{"mark":36,"text":114}," in each product in which it is obligated to make a market; … the affiliate market maker does not make bids or offers, or enter into transactions, inconsistent with that purpose, including by ",{"mark":18,"text":116},"taking directional proprietary positions",{"mark":36,"text":118}," other than in connection with its obligation to maintain two-sided quotations.",[112,116],{"text":121,"type":26},"Two more conditions follow. An independent third-party regulatory service provider would monitor the affiliate and certify compliance to the Commission every year. And customers would be told, every session, before their first order:",{"url":28,"kind":29,"note":123,"text":124,"type":32,"source":125,"segments":126,"highlights":137},"The notice reaches past the exchange: a broker or app through which customers enter orders on the exchange would deliver it too.","(iii) Disclose the conditions and limitations imposed on the affiliate market maker under this section, including that the affiliate market maker's orders are filled after those of unaffiliated members at the same price; and (iv) Not be capable of being dismissed without the customer's affirmative acknowledgment. (v) The designated contract market shall require, by rule, that its intermediary participants and any other person operating an electronic interface through which customers enter orders deliver the notice in accordance with this paragraph (c)(3).","Proposed 17 CFR 38.852(c)(3)",[127,129,131,133,135],{"mark":36,"text":128},"(iii) Disclose the conditions and limitations imposed on the affiliate market maker under this section, including that the affiliate market maker's orders are filled after those of unaffiliated members at the same price; and (iv) Not be capable of being dismissed without the customer's ",{"mark":18,"text":130},"affirmative acknowledgment",{"mark":36,"text":132},". (v) The designated contract market shall require, by rule, that its intermediary participants and ",{"mark":18,"text":134},"any other person operating an electronic interface through which customers enter orders deliver the notice",{"mark":36,"text":136}," in accordance with this paragraph (c)(3).",[130,134],{"src":139,"url":140,"type":81,"poster":141,"caption":142,"product":143,"seconds":84,"operator":85,"recorded":144,"recordedFrom":145},"https:\u002F\u002Fwww.apparentlylaw.com\u002Fresearch-media\u002Fkalshi-sports-board.mp4","https:\u002F\u002Fkalshi.com\u002Fcategory\u002Fsports\u002Fall-sports","https:\u002F\u002Fwww.apparentlylaw.com\u002Fresearch-media\u002Fkalshi-sports-board.jpg","Kalshi’s sports page with no account: game contracts priced as percentages, and the order ticket beside them, with Yes and No prices, ending in a sign-up button.","Public sports page","2026-09-28","Public page, no account; headless browser",{"text":147,"type":53},"What the Commission did not propose",{"url":28,"kind":29,"note":149,"text":150,"type":32,"source":151,"segments":152,"highlights":167},"The proposal sits between two alternatives the Commission put out for comment: disclosure and procedures alone, and a flat ban. It also asks about a cap on the affiliate’s volume.","The Commission preliminarily declined to propose a flat prohibition because, as discussed above, a bona fide market maker can supply liquidity that unaffiliated firms may not, particularly across the broad and continually refreshed contract universes characteristic of prediction markets. … The Commission requests comment on whether it should instead adopt a prohibition on affiliate principal trading firms with no exception.","CFTC, Conflicts and Affiliations (proposed rule), “Alternatives Considered”",[153,155,157,159,161,163,165],{"mark":36,"text":154},"The Commission preliminarily ",{"mark":18,"text":156},"declined to propose a flat prohibition",{"mark":36,"text":158}," because, as discussed above, a bona fide market maker can supply liquidity that unaffiliated firms may not, particularly across the broad and ",{"mark":18,"text":160},"continually refreshed contract universes characteristic of prediction markets",{"mark":36,"text":162},". … The Commission ",{"mark":18,"text":164},"requests comment on whether it should instead adopt a prohibition",{"mark":36,"text":166}," on affiliate principal trading firms with no exception.",[156,160,164],{"text":169,"type":26},"The same proposal covers swap execution facilities and clearinghouses with affiliates, bars a self-regulatory organization from acting as the designated examiner of its own affiliated futures commission merchant, and would require at least 35 percent public directors on an exchange’s board. It is a proposal: nothing in it binds anyone until the Commission adopts a final rule.",{"text":171,"type":53},"What a builder does with this",{"type":173,"items":174},"ul",[175,176,177,178],"If you run, or plan, an exchange with an affiliated market maker: decide now whether the design works with the affiliate filled last at every price and quoting two-sided markets under the terms of any filed program, and budget for an independent monitor and an annual certification.","If you distribute a partner exchange’s contracts through your own app: plan for a per-session notice customers must acknowledge before their first order, delivered in your interface.","If you are choosing a partner exchange: ask whether it has an affiliate that trades, what its rulebook says about that affiliate, and how it would meet § 38.852 if adopted.","If the proposal affects your product: comments are due October 5, 2026, identified by “Conflicts and Affiliations” and RIN 3038-AF76, through Regulations.gov or the “Submit A Public Comment” button on the Federal Register page.",{"src":180,"url":28,"type":81,"poster":181,"caption":182,"product":183,"seconds":84,"operator":184,"recorded":86,"recordedFrom":145},"https:\u002F\u002Fwww.apparentlylaw.com\u002Fresearch-media\u002Fcftc-conflicts-comment-page.mp4","https:\u002F\u002Fwww.apparentlylaw.com\u002Fresearch-media\u002Fcftc-conflicts-comment-page.jpg","The Federal Register page for the proposal on October 1, 2026: the banner giving the comment deadline of October 5, 2026 beside the Submit A Public Comment button, then the summary, the dates and the Regulations.gov instructions for filing a comment.","Proposed rule page: Conflicts and Affiliations","Federal Register",[186,188],{"url":28,"title":187},"CFTC, “Conflicts and Affiliations,” Notice of proposed rulemaking, 91 Fed. Reg. 50926 (Aug. 6, 2026), RIN 3038-AF76 (full text)",{"url":57,"title":189},"KalshiEX LLC, DCM Rulebook v1.29 (file dated Aug. 17, 2026), Rule 2.12","https:\u002F\u002Fwww.apparentlylaw.com\u002Fresearch\u002Fprediction-markets-conflicts-and-affiliations",[192,198,203],{"slug":193,"title":194,"excerpt":195,"published_at":196,"read_minutes":197},"sweepstakes-casinos-florida-sues-operators-and-payment-processors","Sweepstakes casinos: Florida sues the operators and their payment processors","On August 19, Florida’s Attorney General sued VGW and Stake.us, and named five payment companies as co-defendants under a 1951 gambling-loss statute. What the complaints allege, what they do not, and what it changes for vendors.","2026-09-25T12:00:00+00:00",7,{"slug":199,"title":200,"excerpt":201,"published_at":202,"read_minutes":197},"sweepstakes-casinos-founders-checklist","Sweepstakes casinos: a founder’s checklist","Eight questions to answer before launch, in the order the answers depend on each other — each with the statute that makes it matter and an operator’s own written answer.","2026-09-24T12:00:00+00:00",{"slug":204,"title":205,"excerpt":206,"published_at":207,"read_minutes":197},"sweepstakes-casinos-what-the-statutes-leave-standing","Sweepstakes casinos: what the statutes leave standing","California’s and New York’s bans define the product in cumulative parts. What each part leaves open, what the operators have done with it, and why outside a statute is not the same as lawful.","2026-09-23T12:00:00+00:00"]