---
type: source
title: "Cleary Gottlieb: Prediction Markets for Those Who Don't Predict — Company-Specific Event Contracts and SEC vs. CFTC Jurisdiction Gap"
author: "Cleary Gottlieb"
url: https://www.clearygottlieb.com/news-and-insights/publication-listing/prediction-markets-for-those-who-dont-predict-and-those-who-do
date: 2026-04-15
domain: internet-finance
secondary_domains: []
format: article
status: processed
processed_by: rio
processed_date: 2026-05-06
priority: high
tags: [prediction-markets, event-contracts, SEC, CFTC, security-based-swaps, jurisdiction, futarchy-regulatory, governance-markets]
intake_tier: research-task
extraction_model: "anthropic/claude-sonnet-4.5"
---

## Content

Cleary Gottlieb's analysis of event contract regulatory jurisdiction with a critical jurisdictional distinction:

**CFTC jurisdiction:** Event contracts structured as swaps or futures traded on registered DCMs. The CFTC claims "exclusive jurisdiction" over event contracts structured as swaps/futures on DCMs. The preemption claim: state gambling laws preempted by CFTC exclusive jurisdiction — only for DCM-listed contracts.

**SEC jurisdiction:** Event contracts that qualify as "security-based swaps" — specifically, contracts where "an event...directly affects the financial statements, financial condition, or financial obligations of the issuer." These are classified as security-based swaps, not CFTC-regulated swaps.

**The unresolved gap for company-specific event contracts:** The article notes that "a March 2026 CFTC-SEC Memorandum of Understanding committed both agencies to developing 'joint interpretations clarifying definitional boundaries,' acknowledging that classification questions remain unresolved for company-specific event contracts."

**Event contract scope:** The article covers "economic and financial events, news and culture, weather and climate, sports, political events, technology, and science" — but notably flags company-specific events as the unresolved boundary case.

**Key regulatory note:** "Event contracts are not regulated based on what they predict but on how they are structured." Structure determines jurisdiction — not subject matter.

## Agent Notes

**Why this matters:** This is the most important new finding in 38 sessions for the TWAP endogeneity claim. The claim's analytical focus has been CFTC "event contract" vs. state gaming law. But Cleary Gottlieb identifies a THIRD regulatory track: **SEC jurisdiction over company-specific event contracts as security-based swaps.**

MetaDAO's conditional governance markets are LITERALLY company-specific event contracts — they price how a governance decision affects a specific DAO's token. The SEC's jurisdictional test ("directly affects the financial condition of the issuer") maps precisely onto MetaDAO's structure: conditional governance markets directly affect MetaDAO (or any DAO's) financial condition by determining whether a proposal passes.

If the SEC takes the view that MetaDAO conditional markets are security-based swaps:
1. The CFTC's event contract framework doesn't apply (different regulator)
2. The endogeneity argument (aimed at CFTC's event contract definition) doesn't resolve the SEC question
3. Security-based swaps require SEC registration or exemption — neither of which MetaDAO has

This is a GENUINELY NEW REGULATORY VECTOR not in the TWAP endogeneity claim's scope qualifications.

**What surprised me:** Cleary Gottlieb explicitly identifies company-specific event contracts as the unresolved jurisdictional boundary case, and names the SEC-CFTC MOU as the mechanism for joint interpretation development. This means both agencies are actively aware of the gap — it just hasn't been resolved.

**What I expected but didn't find:** No mention of governance markets, futarchy, or MetaDAO specifically. The analysis is framed around traditional corporate event contracts (earnings announcements, M&A outcomes, CEO changes) rather than DAO governance decisions. But the structural parallel is exact.

**KB connections:**
- MetaDAO conditional governance markets may fall outside CFTC event contract definition because TWAP settlement is endogenous — THE PRIMARY CONNECTION. This source adds a NEW scope qualification: even if the endogeneity argument resolves CFTC classification, the SEC's security-based swap jurisdiction over company-specific event contracts may reach MetaDAO's conditional markets through a different theory.
- [[AI autonomously managing investment capital is regulatory terra incognita because the SEC framework assumes human-controlled registered entities deploy AI as tools]] — the "security-based swap" track adds a new SEC-specific exposure vector alongside the existing AI-manager regulatory gap

**Extraction hints:**
- Claim update needed: Add to TWAP endogeneity claim's scope qualifications: "This claim does NOT address the SEC's potential jurisdiction over MetaDAO conditional markets as security-based swaps under CEA Title VII. If MetaDAO governance decisions are classified as company-specific events with 'financial consequences for the issuer,' the SEC (not CFTC) would have jurisdiction — and the endogeneity argument is aimed at CFTC's event contract framework, not SEC's security-based swap framework."
- New claim candidate: "MetaDAO conditional governance markets face a dual-regulator exposure not addressed by the TWAP endogeneity argument: CFTC's event contract framework (endogeneity defense available) and SEC's security-based swap framework (company-specific events with financial consequences — no endogeneity defense available)" — confidence: speculative

**Context:** Cleary Gottlieb is a top-tier global law firm with significant derivatives regulatory practice. This is authoritative secondary analysis from a practitioner with jurisdiction to speak on SEC/CFTC boundary law. Date approximate — article references March 2026 MOU.

## Curator Notes (structured handoff for extractor)
PRIMARY CONNECTION: MetaDAO conditional governance markets may fall outside CFTC event contract definition — adds a new SEC security-based swap track that the endogeneity argument doesn't address
WHY ARCHIVED: Company-specific event contracts / SEC jurisdiction gap is the most important new regulatory finding in 38 sessions — changes the analytical scope of the TWAP endogeneity claim
EXTRACTION HINT: The extractor should update the TWAP endogeneity claim's scope qualifications to add the SEC security-based swap track. This is a gap in the existing claim, not a new standalone claim.
