The Desk: July Edition

We took a small break to enjoy the Fourth of July, but we’re back, and the dog days of summer will not stop us from highlighting June’s swaps and derivatives news. In no particular order, there was further work between the CFTC and SEC to drive harmonization, the CME launched a challenge against the CFTC on the characterization of perpetual futures, the CFTC proposed updates to whistleblower protections and yet more proposed rules for prediction markets. Perhaps the most consequential development: The Desk has added an honorary member to its Editorial Board, Betsy Morris, scroll to the bottom for her headshot. Feel free to reach out with any suggestions for a middle name – we’ve had some good client submissions like Sophia Ro (i.e. SOFR and Rho), Nettie (netting) or Marge (margin). We hope everyone is enjoying the summer.

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Enforcement Roundup

This month’s CFTC enforcement developments include the rescission of the agency’s longstanding no-deny settlement policy, more than $8 million in whistleblower awards, proposed amendments to the CFTC’s whistleblower award rules, and a new enforcement action with cross-border implications. In parallel, CME Group has sued the CFTC to challenge the CFTC’s approval of cryptocurrency perpetual futures contracts.

CFTC Rescinds No-Deny Policy

On June 3, 2026, the CFTC announced that it would rescind its no-deny settlement policy, effective June 8, 2026, bringing the agency in line with a similar recent SEC policy change. Codified since 1998 in Appendix A to Part 10 of the Commission’s rules of practice for adjudicatory proceedings, the policy had prohibited the Commission from accepting settlement offers in administrative or civil proceedings when a respondent or defendant continued to deny the allegations in the complaint or order. The CFTC stated that rescission aligns the agency with most federal agencies and gives it greater flexibility to resolve enforcement actions, conserve resources, provide certainty to parties, and potentially expedite the return of funds to injured investors.

The change has immediate practical implications. Beyond eliminating the no-deny requirement going forward, the Commission announced that it will not enforce existing no-deny provisions in prior settlements. This marks a significant break from nearly three decades of practice and is likely to affect settlement dynamics in CFTC enforcement matters, including by encouraging earlier resolution of disputed cases. Firms subject to existing no-deny provisions should consider whether the Commission’s non-enforcement position creates opportunities to clarify public statements about past settlements.

CFTC Whistleblower Updates

On June 1, 2026, the CFTC announced whistleblower awards totaling more than $8 million to five individuals whose information helped resolve an enforcement action involving a fraudulent scheme and recover substantial funds for defrauded investors. Since issuing its first award in 2014, the CFTC has awarded more than $430 million to whistleblowers in actions that have generated more than $3.7 billion in monetary sanctions. Eligible whistleblowers may receive 10% to 30% of monetary sanctions collected, with awards paid from the Customer Protection Fund.

Separately, on June 11, 2026, the CFTC published a Notice of Proposed Rulemaking that would amend its whistleblower rules by adding a 30% presumption for whistleblower awards of $5 million or less, subject to Commission discretion and consideration of the relevant regulatory factors. Modeled on SEC Rule 21F-6(c), the proposal is designed to further harmonize the CFTC and SEC whistleblower programs while improving efficiency, transparency, and predictability in award determinations. Comments are due by July 15, 2026.

Firms should reassess their whistleblower risk profile in light of the program’s continued growth and the proposed 30% award presumption, which may further incentivize external reporting. Compliance teams should review and reinforce internal reporting channels to encourage employees to raise concerns internally before filing tips with regulators. The continued harmonization with SEC rules also underscores the need for coordinated compliance frameworks across agencies.

CFTC Orders Two Foreign Firms to Pay $2.5 Million for Illegal Off-Exchange Transactions with U.S. Customers

On June 29, 2026, the CFTC announced settled charges against two foreign firms, Netrios LP Ltd. and Red Acre Ltd., for facilitating illegal off-exchange leveraged or margined retail commodity transactions with U.S. customers who were not eligible contract participants. Netrios agreed to pay a $1.75 million civil monetary penalty, Red Acre agreed to pay a $750,000 penalty, and both firms must cease and desist from the unlawful conduct. The CFTC found that Netrios sold specialized services that supplied essential functions for offshore, off-exchange branded platforms soliciting U.S. customers even though such activities lawfully could only be performed on a CFTC-registered exchange, while Red Acre aided Netrios by providing customer and other support. The SEC also announced settled charges against the same firms based on the same underlying conduct.

This action is consistent with the CFTC’s broader focus on market access, registration boundaries, and intermediaries or infrastructure providers that facilitate U.S. customer activity from offshore platforms. Firms operating or assisting offshore platforms should therefore assess whether their services facilitate U.S. customer access subjecting them to CFTC jurisdiction.

CME Challenges CFTC Approval of Crypto Perpetual Futures

On June 18, 2026, CME Group filed a complaint in the U.S. District Court for the District of Columbia against CFTC Chairman Michael S. Selig and the Commission, challenging the CFTC’s May 29, 2026 order approving KalshiEX LLC’s BTCPERP Bitcoin perpetual contract as a futures contract. CME also challenges a related policy statement permitting other futures exchanges to list similar digital commodity perpetuals through self-certification. CME seeks vacatur of the order and policy statement, as well as a declaration that cryptocurrency perpetual contracts are swaps—not futures—under the Commodity Exchange Act (CEA).

The complaint alleges that the CFTC acted arbitrarily and capriciously by failing to analyze the statutory framework, recognize what CME characterizes as a departure from the CFTC’s prior position on this topic, and acknowledge the real-world implications of reclassifying these instruments. The central legal question is whether crypto perpetual contracts—which lack a fixed expiry date and use periodic funding payments—are properly classified as listed futures or as swaps under Dodd-Frank. CME argues that perpetuals’ structural features place them within the swaps regime Congress established; the CFTC and Kalshi characterize the lawsuit as competition-driven.

Firms operating in, or considering entry into, the perpetual futures market should monitor this litigation closely because the outcome could significantly affect the regulatory classification of these products and the compliance frameworks that apply to them.

Tiffany Payne and Nader Raja | Email

The Summer of Harmonization: CFTC and SEC Seek Comment on Data Reporting and Portfolio Margining

The CFTC and SEC closed out June with a pair of joint requests for comment that continue the agencies' methodical march toward regulatory harmonization. On June 18, the agencies issued a joint request for public comment on opportunities to harmonize, modernize, and streamline data reporting requirements for the swap and security-based swap markets. Eight days later, on June 26, the agencies followed with a joint request for comment on approaches to harmonize the regulatory frameworks applicable to portfolio margining across securities, security-based swaps, futures, swaps, and related positions.

The data reporting RFC asks whether changes to the design, scope, and structure of swap and security-based swap reporting requirements would produce greater alignment between the two frameworks, and thereby enhance transparency, reduce operational complexity, and improve data quality while preserving each agency's distinct Dodd-Frank mandate. Comment topics include cross-framework harmonization, standardized identifiers and reference data, and implementation considerations. For reporting counterparties who have spent over a decade maintaining parallel builds for CFTC Part 43/45 and SEC Regulation SBSR, the invitation to consolidate is overdue.

The portfolio margining RFC is arguably the bigger prize. The agencies are evaluating whether greater coordination in portfolio margining requirements could improve risk management efficiency, reduce market fragmentation, and enhance customer protections, with comment sought on cross-margining and cross-product offsets, capital, segregation, and collateral treatment, margin methodologies, and clearing organization considerations. SEC Chairman Atkins framed cross-margining as an opportunity to unlock liquidity that remains frozen in separate accounts. Further developments here present an opportunity to change the current siloed account structures that leave real capital on the table.

Neither release arrives in a vacuum. In March, the agencies entered into a Memorandum of Understanding establishing a Joint Harmonization Initiative to align regulatory definitions, coordinate oversight, and facilitate data sharing, and these RFCs represent the initiative moving from framework to specifics. The pattern is worth watching: rather than a single omnibus harmonization rulemaking, the agencies are proceeding product-line by product-line. Both comment periods run 60 days from Federal Register publication, so market participants with strong views on cross-margining mechanics or reporting field rationalization should be drafting now.

Barrett Morris | Email

CFTC Proposes Rule Amendments for Prediction Markets

On June 10, 2026, the CFTC issued a Notice of Proposed Rulemaking (NPRM) addressing event contracts traded on CFTC-registered prediction markets. The proposal would amend Regulation 40.11 and add Appendix F to Part 40, while preserving the existing self-certification process for platforms that certify compliance with the CEA and CFTC rules at least one business day prior to listing a contract. Its core purpose is to clarify how the CFTC will apply the CEA’s “Special Rule,” which permits the CFTC to review and, where appropriate, prohibit event contracts involving unlawful activity, terrorism, assassination, war, gaming, or similar activities if the Commission determines that the contracts are contrary to the public interest. Comments are due by July 27, 2026.

The proposal would define when an event contract “involves” an enumerated activity by focusing on whether settlement is determined by the occurrence, extent of occurrence, or contingency of that activity. It also proposes two alternative definitions of “gaming” and clarifies that a contract involving an enumerated activity is not automatically prohibited. Instead, the CFTC would make a separate public-interest determination using general and activity-specific factors, including hedging or price-basing utility, informational value, responsible innovation, fair competition, manipulation risk, settlement integrity, material nonpublic information risk, and strain on compliance infrastructure. Review may begin only through a written determination issued by the CFTC within 10 days of listing, must generally conclude within 90 days, and is deemed concluded if the Commission does not issue an adverse order within the required period.

The NPRM provides enhanced structure but leaves important questions unresolved. By treating variations in state gambling law as relevant to the public-interest analysis, the proposal may sharpen rather than resolve disputes over federal preemption. It also leaves uncertainty around how the Commission will weigh competing public-interest factors, how event contracts that implicate securities-related information will be allocated between CFTC and SEC jurisdiction, whether the existing insider-trading framework is sufficient for prediction markets, and how retail consumer-protection concerns will be addressed.

The rulemaking is part of a broader CFTC effort to assert federal oversight of prediction markets amid growing state and federal scrutiny. The CFTC has recently sued states, including most recently, New Mexico and Kentucky, to block efforts to apply state gaming laws, enforcement actions, or transaction fees to CFTC-registered contract markets. The Commission also issued a separate NPRM that would amend Parts 15, 16, and 17 and create an alternate reporting framework for certain fully collateralized event contracts. Reports that the CFTC is conducting an extensive investigation into Polymarket (the same platform at issue in the CFTC’s insider trading actions involving event contracts)—including scrutiny of promotional and social-media activity—further underscore that prediction markets face parallel rulemaking, litigation, and enforcement risk.

Market participants should treat the NPRM as a signal to strengthen compliance infrastructure for event-contract activity. Relevant steps include reviewing product-design controls, settlement criteria, surveillance systems, information barriers, employee trading policies, confidentiality controls, escalation procedures, and training for personnel who may possess market-moving nonpublic information. Firms should also monitor state preemption litigation, reporting developments, and platform-specific enforcement activity since CFTC registration alone may not resolve all legal and regulatory risk.

Tiffany Payne and Barrett Morris | Email

Perps Go Physical: CFTC Asks If Crude Can Run Forever

The CFTC continued its steady expansion of the perpetual futures conversation on June 22, issuing a request for comment on two related developments in the energy derivatives markets: the extension of standard futures contracts to 24/7 trading, and the potential listing of perpetual contracts referencing physically delivered or storable energy commodities, such as crude oil. Until now, the perpetuals discussion has lived almost entirely in digital asset land. This RFC is the CFTC’s first formal acknowledgment that continuous trading and perpetual contract design are migrating toward traditional physical commodities, where the delivery, storage, and settlement mechanics raise a very different set of questions.

The request is organized around two sets of questions: the first addresses extending standard futures contracts, including energy futures, to a 24/7 schedule while retaining their fixed expirations, and the second addresses perpetual contracts that reference physically delivered or storable energy commodities. Chairman Selig framed the exercise as building a "data-driven record" to help the Commission understand the market implications as registered entities extend trading hours and introduce new contract designs, while preserving protections against manipulation and market disruption. Reading between the lines, the CFTC appears focused on whether the funding-rate mechanics that anchor crypto perps to deep, continuously traded spot markets can translate to commodities where spot liquidity follows business hours and the underlying sits in a pipeline or storage tank. The CFTC is also focused on how these developments might impact existing futures energy contracts and practical questions regarding how DCM core principles and federal position limits would apply. The potential for price manipulation or dislocation, arbitrage or unintended impacts on existing futures markets will need to be assessed.

For energy market participants, the questions worth engaging on are practical: how margin cycles, settlement price determination, and delivery obligations function when the market never closes, and whether perpetual structures referencing storable commodities create convergence and manipulation risks that fixed-expiry contracts do not. Comments are due within 30 days of publication in the Federal Register. Oddly a short window relative to the 60-day periods on the joint CFTC–SEC harmonization RFCs covered elsewhere in this issue, suggesting the CFTC wants this built quickly.

Barrett Morris and Stuart Armstrong | Email

Interesting Links

• Consortium led by Visa, Mastercard and Coinbase launch a stablecoin
• CFTC NAL 26-19 for DCMs converting perpetual-style digital commodity futures into true digital commodity perpetual futures
• SEC publishes draft strategic plan for public comment
• ISDA OTC Derivatives Compliance Calendar
• Kalshi and Polymarket are takeover targets?
• Pricing Compute Futures: Forward Curve and Volatility for a Non-Storable, Depreciating Commodity

Meet Betsy Morris, honorary Editorial Board Member