SDNY US Attorney Clayton Cautions Enforcement Activity Could Be Coming to Prediction Markets

Prediction markets have drawn increased attention from both market participants and regulatory bodies, as trading volumes on these platforms have reached new highs. One regulator recently made statements about these markets, prompting some to pay close attention to possible enforcement activity in this space. 

In particular, US Attorney Jay Clayton for the Southern District of New York recently addressed the evolving landscape of prediction markets during his speech at the Securities Enforcement Forum in New York on February 5.  A former SEC Chairman during the first Trump administration, Clayton highlighted the importance of determining the applicable legal framework for these markets, drawing parallels between certain prediction market contracts and more conventional financial instruments such as put options. 

One of Clayton’s statements drew the most interest.  During his speech, he remarked that an event contract paying out if a stock falls below a certain price could closely resemble a derivative product, raising questions about its classification under federal securities law. His comments underscore regulators' ongoing efforts to clarify the boundaries and obligations for market participants as prediction markets continue to expand. 

You can find coverage on Clayton’s remarks by clicking here: https://www.bloomberg.com/news/articles/2026-02-05/wall-street-s-top-cop-expects-enforcement-on-prediction-markets