Citadel Securities is pressing U.S. regulators to place equity-linked prediction contracts under the oversight of the Securities and Exchange Commission, rather than allowing them to remain solely within the Commodity Futures Trading Commission’s derivatives framework.
In a regulatory letter filed on September 9 and addressed to the SEC and CFTC, the market-making firm argued that prediction contracts tied to corporate key performance indicators—such as Kroger’s sales or United Airlines passenger numbers—should be treated as security-based swaps when their value is linked to publicly traded companies.
Stephen John Berger, global head of government and regulatory policy at Citadel Securities, said: “Congress established this framework for good reason: trading in equity-linked products directly implicates the integrity of the underlying securities markets, impacting our public companies and investors.”
Citadel warned that some CFTC-registered venues can self-certify certain products and begin trading as early as the following business day, while SEC procedures generally require compliance demonstrations, public feedback, and approval before launch. The firm argued that trading venues should not select their regulator by describing similar products differently.
The letter also raised insider trading concerns, noting that corporate employees, suppliers, or others with non-public information about sales, customer numbers, or reporting decisions could trade prediction contracts before underlying data is public. Citadel said the SEC and securities exchanges have decades of experience investigating insider trading and operating cross-market surveillance.
Additionally, Citadel requested faster SEC product reviews and clearer rules for event contracts and perpetual derivatives, saying legitimate products should compete on merit rather than benefit from jurisdictional inconsistencies.
