Citadel Securities Asks SEC to Regulate Prediction Markets Tied to Public Companies

The petition shifts a jurisdictional dispute between two federal regulators into public view, with consequences for how contracts linked to stock-listed companies are priced and overseen.

Citadel Securities submitted a formal request to the Securities and Exchange Commission on September 9, 2026, asking the agency to assert regulatory authority over prediction market contracts that are linked to publicly traded companies, according to a Bloomberg report published the same day.

The firm's argument centers on jurisdiction. Citadel Securities contends that because the underlying reference for these contracts is a publicly traded company, the SEC, not the Commodity Futures Trading Commission, is the appropriate regulator. The CFTC has to date taken primary responsibility for prediction market contracts, treating them as event-based derivatives under its existing authority over futures and swaps.

The distinction matters because the SEC and CFTC operate under different statutory frameworks. The SEC's authority flows primarily from the Securities Exchange Act of 1934 and the Securities Act of 1933, which govern instruments tied to equity securities. The CFTC's authority derives from the Commodity Exchange Act, which covers futures and derivative contracts on commodities, including financial commodities. When a contract's underlying reference is a stock or stock-linked outcome, the line between the two agencies becomes contested.

Prediction markets allow participants to take positions on the probability of a future event. When those events involve outcomes at specific companies, such as whether a firm will beat an earnings estimate or complete a merger, the contracts begin to resemble equity derivatives more than commodity futures. Citadel Securities' petition argues this structural resemblance should determine which agency supervises them.

Citadel Securities is among the largest market makers in US equity markets. According to its own published disclosures, the firm executes a significant share of US retail equity order flow. Its interest in the regulatory classification of prediction market contracts is therefore both structural and commercial: regulatory clarity affects how such contracts are margined, disclosed, and traded alongside or against conventional equity instruments.

The CFTC has in recent years approved several prediction market platforms to offer event contracts to US participants. Kalshi, one of the most prominent CFTC-regulated prediction market operators, won a federal court ruling in 2024 affirming the agency's authority to allow contracts on congressional election outcomes. That ruling, issued by the US District Court for the District of Columbia, established a precedent that the CFTC's jurisdiction over event contracts is broad. Citadel Securities' petition implicitly challenges the outer boundary of that breadth when the referenced event involves a securities issuer.

The SEC has not publicly responded to the petition as of the publication date of this article. What the agency's response will be, and on what timeline, is not known. A formal rulemaking or jurisdictional determination by the SEC would require public comment under the Administrative Procedure Act, a process that typically takes months to years.

The overlap between securities regulation and derivatives regulation has been a long-running source of ambiguity in US financial law. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 attempted to clarify the boundary by creating the category of security-based swaps, which fall under SEC authority, versus swaps on non-securities, which fall under CFTC authority. Whether prediction market contracts on corporate outcomes fit cleanly into either category is a question Citadel Securities is now pressing regulators to resolve.

For investors and platform operators, the regulatory classification carries practical consequences. SEC-regulated instruments are subject to different margin requirements, reporting obligations, and anti-fraud provisions than CFTC-regulated instruments. A shift in oversight could change the cost of participation, the required disclosures, and the mechanisms available for enforcement if manipulation were alleged.

Neither the SEC nor the CFTC has announced any joint proceeding or interagency coordination in response to the Citadel Securities submission. Whether such coordination will occur is unknown. The text of the formal petition had not been publicly released as of the time of publication.