a potential financial, economic, or commercial consequence.” 11 Also, CEA section 1a(47)(A)(i) defines the term “swap” to include “any agreement, contract, or transaction . . . that is a put, call, cap, floor, collar, or similar option of any kind that is for the purchase or sale, or based on the value, of 1 or more interest or other rates, currencies, commodities, securities, instruments of indebtedness, indices, quantitative measures, or other financial or economic interests or property of any kind.” 12 Event contracts traded as swaps under CEA section 1a(47)(A)(i) are sometimes referred to as binary options, a type of swap which is an “option whose payoff is either a fixed amount or zero.” 13 Prediction markets can also list event contracts for trading as futures contracts. 14 Since futures contracts are specifically excluded from the statutory definition of “swap,” these event contracts are not swaps. 15 Although the event contracts listed on CFTC-registered DCMs and SEFs are swaps or futures contracts subject to the jurisdiction of the CFTC, 16 other event contracts referencing events associated with potential financial, economic or commercial
11 7 U.S.C. 1a(47)(A)(ii). 12 7 U.S.C. 1a(47)(A)(i). 13 See CFTC Futures Glossary, available at https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/CFTCGlossary/index.htm#B . 14 See CEA section 2a(1)(A), 7 U.S.C. 2(a)(1)(A). A list of event contracts certified for listing as futures contracts is available on the CFTC’s web site. See https://www.cftc.gov/IndustryOversight/IndustryFilings/TradingOrganizationProducts?Type=Future&Cate gory=Event . 15 CEA section 1a(47)(B), 7 U.S.C. 1a(47)(B), provides that “[t]he term ‘swap’ does not include – (i) any contract of sale of a commodity for future delivery (or option on such contract) ….” 16 See supra , note 5.
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