Self-Certification Is Not Self-Approval: The CFTC Draws a Line Around Micro Sports Contracts
De Silva Law Offices, LLC
Prediction markets let people trade contracts on real-world events, from interest rates and elections to the outcome of a game. Contracts on sports have become the focus of a fight, now in courts across the country, over who gets to regulate these markets. Many states say a sports contract is a bet that needs a state gaming license. The CFTC says it is a swap that only the CFTC can regulate, and on October 27 it sued Utah over the issue. Days earlier, the CFTC showed that federal oversight also means saying no. It stopped two exchanges, Novig and ProphetX, from listing sports contracts they had certified on their own.
Novig’s filings covered “micro” contracts as narrow as which player will take the first three-point shot of a quarter, and there the CFTC’s concern was manipulation. ProphetX wanted to list contracts on whether any NFL game in a given week would end in a “scorigami,” a final score that has never occurred before. Here the CFTC questioned whether the contracts are swaps at all.
Neither exchange needed the CFTC’s approval to list these contracts. Under the Commodity Exchange Act, an exchange can certify that a contract complies with federal law and list it as soon as the next business day.[1] Orders issued on October 21 and 22 stay those listings and open proceedings to decide whether the certifications were false.[2] No contract has been found to violate the law, and the exchanges’ answers are due November 18 and 19.
What the CFTC Ordered
Both companies are sports-focused exchanges registered with the CFTC as designated contract markets. Novig runs its exchange through Ludlow Exchange, LLC.[3]
ProphetX came first. On October 15, it certified a contract titled “Will There Be A Scorigami in NFL Week 7 of the 2026 Season?” and a class of weekly scorigami contracts based on it. Six days later, the CFTC stayed both “effective immediately” and directed ProphetX to explain why its certification should not be found false.[4]
Novig’s order followed the next day and reached much further. Between July and October, Novig had certified NBA and WNBA prop contracts. They could settle on a wide range of statistics recorded by a player or team in a game or part of a game. Novig had also certified the same contracts a second time as classes of swaps.[5] The CFTC ordered Novig to withdraw the class certifications and resubmit individual contracts or smaller classes. It also stayed listings under the original certifications while it decides whether they were false.[6] The same day, Novig filed a much narrower certification, for a single contract on whether Jalen Brunson would score more than 29.5 points in the Knicks’ October 23 game against the Celtics.[7]
Front Office Sports reported the action on October 22, quoting a CFTC spokesperson who said it reflects Chairman Michael Selig’s commitment to protecting consumers from potential fraud or manipulation. According to the same report, senior CFTC officials have warned DraftKings and FanDuel that they risk similar action if they list micro contracts.[8]
How Self-Certification Works
Section 5c(c)(1) of the Commodity Exchange Act lets an exchange list a new contract by filing a written certification that the contract complies with the Act and the CFTC’s rules. Under CFTC Rule 40.2, the filing must reach the CFTC by the open of business on the business day before the contract lists. It must also explain how the contract complies with the Act, including the core principles.[9] No one at the CFTC approves the contract first. The certification is the exchange’s own representation, which is why both orders frame the question as whether the certifications were false.
Rule 40.2(c) lets the CFTC stay a listing while it decides whether a certification was false. That power cannot be delegated to any CFTC employee, and both orders came from the CFTC itself rather than its staff.[10] Rule 40.2(d) lets an exchange certify a whole class of swaps at once if, among other things, every swap in the class uses the same pricing source and method as a contract already certified. The CFTC can require the exchange to withdraw a class certification and submit the swaps individually.[11] The Novig order used both rules.
Neither order relies on Rule 40.11, which allows a 90-day review of event contracts that may involve gaming.[12] Both turn instead on whether the exchange’s certification was accurate.
The CFTC has stepped in on other features of these markets this year. In July, in a letter on sportsbook-style odds displays, its staff warned the firms the CFTC regulates that showing event contract prices as American odds could be a deceptive practice under Rule 180.1.[13] In September, Front Office Sports reported that the CFTC had sent letters to Kalshi, Polymarket, Rothera and Novig about their incentive programs.[14]
Novig’s Micro Contracts and Manipulation Risk
Baseball offers a recent example of the risk in highly granular contracts. In November 2025, federal prosecutors in Brooklyn charged two Cleveland Guardians pitchers with taking bribes from bettors to throw particular pitches. Both pleaded not guilty. Major League Baseball responded by having its partner sportsbooks cap bets on individual pitches at $200.[15] A contract that turns on one pitch, or one shot, can depend on what a single player decides to do.
For exchanges, that concern is built into the law. Under Core Principle 3, a designated contract market may list only contracts that are not readily susceptible to manipulation, and every self-certification must explain how the contract meets that standard.[16]
Novig’s certifications, the CFTC found, covered contracts with “widely varying risks of manipulation.” At one end was the number of points a team scores in a game, an aggregate measure that is harder to manipulate and easier to detect. At the other end was whether a particular player will be the first to attempt a three-point shot in a particular quarter.[17]
The order named three features as its main concerns. One was a rule that settles contracts on the order of in-game events, such as the first player to score. In the CFTC’s words, “the compressed timeframe and player-specific nature of such contracts amplify the manipulation concerns that attach to micro-event products generally.” Another was a single-quarter period, because a player can more easily control what happens in a quarter than across a game. The third was attempt statistics, such as shots attempted in a quarter, which the order said “may easily be manipulated by a player, teammate, or coach.”[18]
The holding itself is narrower than those concerns. The CFTC did not decide that any contract violates Core Principle 3. It decided that a class this broad could not be analyzed, or reviewed, in a single filing. It also rejected Novig’s approach of certifying the full range of contracts under Rule 40.2(a) and then certifying the same range again as a class. That, the CFTC said, made the class certification “a pointless exercise.”[19]
The CFTC’s prediction markets rulemaking points the same way. Its June 2026 proposal on event contracts separates sports contracts that depend on performance over an extended period of play from contracts that settle on a specific play, pitch, shot or foul. In the CFTC’s view, the first kind can serve price discovery, and the second does not provide meaningful information.[20]
ProphetX’s Scorigami Contracts and the Swap Definition
The ProphetX order goes to a more basic question, whether the contracts are swaps at all. That matters because exchanges generally certify sports event contracts as swaps.[21] One clause of the statutory definition covers a contract whose payment depends on an event “associated with a potential financial, economic, or commercial consequence.”[22]
The CFTC reads that clause broadly. Its October 9 proposal, discussed in the firm’s analysis of the CFTC’s October swap rules, would add event contracts, sports contracts included, to the CFTC’s definition of a swap.[23] It argues that many in-game events carry potential economic consequences. A close game is more likely to draw television viewers than a blowout, for example, and some player contracts pay bonuses tied to individual statistics.[24]
The CFTC saw scorigami differently. The order calls it “a sports trivia milestone.” ProphetX’s filing said the contracts let market participants “manage associated economic exposures,” and it listed broadcasters, NFL clubs, sponsors, venues and insurers as businesses with an interest in NFL scoring. The CFTC was not persuaded. It found that the filing did not explain how a never-before-seen final score corresponds to “any identifiable potential financial, economic, or commercial consequence.” On that record, the CFTC said it “presumptively believes the certification is false.”[25]
The swap proposal had anticipated this. Where an event lacks a potential economic consequence and fits no other part of the swap definition, the CFTC said it “retains authority to stay the listing of that contract,” citing Rule 40.2(c).[26] Twelve days later, it used that authority. The order is careful about its reach and does not decide whether any contract on NFL scoring, or even any scorigami contract, could qualify as a swap.[27] Still, it signals that the swap definition has an outer edge, even under the CFTC’s broad reading.
What Remains Open
Both exchanges must answer by mid-November, and the CFTC has not said what will follow. The ProphetX order reserves every option, including lifting the stay or allowing the contracts with amended terms.[28] Neither order says what consequences a false certification would carry. It is also unclear how the CFTC will treat similar contracts on other exchanges, and whether its final event contract rule will address micro contracts directly.
Where the CFTC Is Drawing the Line
The proceedings are just beginning, but the orders already show how the CFTC is thinking about sports contracts. A self-certified contract can draw formal action within days, and the CFTC is not treating sports as a single category. It weighs, among other things, how long a contract runs, which statistic it uses, who could influence the result and what economic purpose the contract serves. On those factors, a contract on the final result of a game and a contract on the first shot of a quarter fall on opposite sides of the line.
Filings from the same week show exchanges drawing some of these lines on their own. On October 21, the day before the Novig order, Kalshi certified a class of NBA statistics contracts. They ask how many of a statistic a player or team will record, and none turns on who records one first. The class lists only made shots and other box-score counts rather than attempts, and it rests on a reference contract for a single game.[29]
The leagues have moved in the same direction. On October 16, the NBA told its sportsbook partners to stop offering “first-of” markets, such as which player scores a game’s first points.[30] Ten days later, the CFTC and the NBA signed a memorandum of understanding to share information on integrity in prediction markets. The CFTC says MLB and the NHL have taken the same step.[31]
Front Office Sports also reported that other exchanges have complained that many state regulators allow sportsbooks to offer micro bets.[32] If that is right, the federal line on these contracts is now tighter than the one many states draw.
The orders also bear on the larger dispute over who regulates these contracts. On October 2, a federal court in Illinois sided with Kalshi and Coinbase, holding that Kalshi’s sports contracts are likely swaps and that Illinois’s licensing laws likely conflict with the Commodity Exchange Act.[33] On October 16, Novig asked a federal court in Missouri to bar the state from applying its gambling laws to Novig’s sports contracts, which it calls “quintessential swaps” under the CFTC’s exclusive jurisdiction.[34] The CFTC’s own suit against Utah seeks to block state enforcement against CFTC-registered exchanges, and the CFTC says it has started proceedings against nine other states.[35]
New Jersey’s petition asking the Supreme Court to take up the question is pending. The firm’s state-by-state map of the sports event contract litigation tracks where those cases stand. If the courts side with the CFTC, decisions about individual sports contracts are likely to come through orders like these.
Practical Steps for Exchanges Planning Micro Contracts
Exchanges planning in-game, player-level or other granular contracts should expect the CFTC to read those filings closely.
Start with the structure of the filing. The Novig order says an exchange that wants to list a class of contracts should certify a comparatively narrow reference contract under Rule 40.2(a), and then certify the class under Rule 40.2(d).[36] Grouping contracts by statistic and time period lets each filing address its own manipulation risks.
The filing also needs to make the economic case. For any contract beyond standard game outcomes, it should explain the financial, economic or commercial consequence of the event itself. The ProphetX order suggests that a list of industries with an interest in a sport will not be enough unless the filing ties them to the outcome the contract measures.
Each manipulation risk needs its own answer. Ordering rules, short time periods and attempt statistics now call for separate analysis, or should be left out. The filing should also say who may have an information edge, such as athletes, coaches, officials and venue staff. It should explain how the exchange will keep them out and how it will watch for unusual trading before an outcome is known. The CFTC’s June proposal encourages exchanges to work with leagues and other governing bodies before listing sports contracts.[37]
Finally, plan for a stay. Both orders took effect immediately and gave the exchange four weeks to answer. An exchange should leave time between certification and listing, hold off on marketing a contract until it is live, and have a plan for open positions if a listing is stayed.
Where This Leaves Self-Certification
Self-certification still lets an exchange list a new contract as soon as the next business day. But the certification is the exchange’s own representation that the contract complies with the law. For sports contracts that turn on a single play, a short window or an outcome with no clear economic consequence, the CFTC has now shown that it will test that representation. The exchanges’ answers, due November 18 and 19, and what the CFTC does with them will show how firm that line is.
De Silva Law Offices, LLC represents exchange applicants, introducing brokers, fund sponsors and individual traders in matters involving CFTC-regulated prediction markets and event contracts, and it has filed comment letters with the CFTC on its prediction market rulemakings. Questions about this article may be directed to info@desilvalawoffices.com or 312-500-8424.
NB: This article is commentary on a matter of public record and is not legal advice. Reading it does not create an attorney-client relationship. R Tamara de Silva is the Managing Partner of De Silva Law Offices, LLC, Chicago, and writes on financial regulation, derivatives and prediction markets.
Notes
[1] Commodity Exchange Act § 5c(c)(1), 7 U.S.C. § 7a-2(c)(1); 17 C.F.R. § 40.2(a)(2).
[2] Order Instituting Proceedings and Staying the Listing of the Contract Under Commission Regulation 40.2(c), In re NFL Weekly Scorigami Contracts Self-Certified by ProphetX LLC (CFTC Oct. 21, 2026) (the “ProphetX Order”); Order to Withdraw Certification Under Commission Regulation 40.2(d) and Instituting Proceedings and Staying the Listing of Contracts Under Commission Regulation 40.2(c), In re NBA and WNBA Prop Contracts Self-Certified by the Ludlow Exchange, LLC (CFTC Oct. 22, 2026) (the “Ludlow Order”).
[3] Novig wins CFTC approval as competition intensifies in sports prediction markets, CNBC (June 16, 2026); ProphetX Order, supra note 2, at 1; Ludlow Order, supra note 2, at 1 (Ludlow is a designated contract market doing business as Novig).
[4] ProphetX Order, supra note 2, at 1–2 & n.2 (submissions dated October 14, 2026 and received October 15, 2026), 7.
[5] Ludlow Order, supra note 2, at 1, 3–4 & n.14.
[6] Id. at 2, 9.
[7] Ludlow Exchange, LLC, Self-Certification of the NBA Prop Contract (certified Oct. 22, 2026) (Jalen Brunson, points, full game, more than 29.5, New York Knicks vs. Boston Celtics, Oct. 23, 2026).
[8] Ben Horney, Novig, ProphetX Told to Pause Scorigami, Micro Contract Plans, Front Office Sports (Oct. 22, 2026).
[9] 7 U.S.C. § 7a-2(c)(1); 17 C.F.R. § 40.2(a)(2)–(3).
[10] 17 C.F.R. § 40.2(c); ProphetX Order, supra note 2, at 8; Ludlow Order, supra note 2, at 1.
[11] 17 C.F.R. § 40.2(d)(1)–(2).
[12] 17 C.F.R. § 40.11(c).
[13] Letter from the CFTC Division of Market Oversight and Market Participants Division (July 30, 2026), see CFTC Press Release No. 9278-26.
[14] Horney, supra note 8; Asset Class: CFTC Nixes Scorigami, Front Office Sports (Oct. 22, 2026).
[15] Associated Press, MLB, sportsbooks cap bets on individual pitches in response to pitch-rigging scandal (Nov. 10, 2025); Field Level Media, Guardians pitchers plead not guilty in pitch-rigging case.
[16] Commodity Exchange Act § 5(d)(3), 7 U.S.C. § 7(d)(3); 17 C.F.R. § 38.200; 17 C.F.R. pt. 38, app. C; 17 C.F.R. § 40.2(a)(3)(v).
[17] Ludlow Order, supra note 2, at 6.
[18] Id. at 6–7.
[19] Id. at 7–8.
[20] Prediction Markets; Public Interest Determinations, 91 Fed. Reg. 35,806, 35,835–37 (proposed June 12, 2026), as described in Further Definition of “Swap” – Inclusions, at 23 (CFTC Oct. 9, 2026) (pre-publication version), published at 91 Fed. Reg. 66,022 (Oct. 19, 2026) (the “Swap Proposal”).
[21] Swap Proposal, supra note 20, at 15; see, e.g., CFTC, Designated Contract Market Products: 61740 (ProphetX NFL Football Player Statistic Contracts, listed as “Swap (Binary Option)”).
[22] Commodity Exchange Act § 1a(47)(A)(ii), 7 U.S.C. § 1a(47)(A)(ii).
[23] Swap Proposal, supra note 20, at 12, 39–40 (proposed 17 C.F.R. § 1.3 (Swap)(2)(i)(G)).
[24] Id. at 25–26.
[25] ProphetX Order, supra note 2, at 4 & n.12, 6.
[26] Swap Proposal, supra note 20, at 27 & n.99 (citing 17 C.F.R. § 40.2(c)).
[27] ProphetX Order, supra note 2, at 6.
[28] Id. at 7.
[29] KalshiEX LLC, CFTC Regulation 40.2(d) Class Certification Regarding the Initial Listing of the “How many <stat> will <entity> record <time period> of <NBA game>? (Scalar)” Contracts (Oct. 21, 2026).
[30] NBA Draws New Lines on What Fans Can Bet On, Front Office Sports (Oct. 16, 2026); Which NBA bets did the league ban at FanDuel, DraftKings?, SBC Americas (Oct. 16, 2026).
[31] CFTC Press Release No. 9314-26 (Oct. 26, 2026).
[32] Horney, supra note 8.
[33] Coinbase Fin. Mkts., Inc. v. Raoul, Nos. 1:25-cv-15406, 1:26-cv-03659, 1:26-cv-07363 (N.D. Ill. Oct. 2, 2026).
[34] Crypto.com, Novig Seek Court Protection for Sports Contracts as Missouri Deadlines Expire, Crowdfund Insider (Oct. 2026).
[35] CFTC Press Release No. 9315-26 (Oct. 27, 2026).
[36] Ludlow Order, supra note 2, at 8.
[37] What do proposed CFTC prediction market rules say about sports and gaming?, SBC Americas (June 10, 2026).