,,ii #aaith ,,congress #b;d ,session ,s4 #ddfi ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,april #cj1 #bjbf,mr4 ,mc,cormick 7for himself and ,mrs4 ,gillibrand7 introduced the following bill2 which was read twice and referred to the ,committee on ,agriculture1 ,nutrition1 and ,forestry ,a ,,bill ,to amend the ,commodity ,exchange ,act to modify provisions relating to event contracts1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,prediction ,market ,act of #bjbf4 #b4 ,special rules relating to event contracts ,section #e;c of the ,commodity ,exchange ,act 7#g ,u4,s4,c4 #g;a-#b7 is amended-- 7#a7 in subsection 7c77#e77;,c7-- 7,a7 in the subparagraph heading1 by striking event contracts and2 7,b7 by striking clauses 7i71 7ii71 and 7iv72 7,c7 in clause 7iii71 by striking the clause designation and heading and all that follows through ,in connection in subclause 7,i7 and inserting the following3 7i7 ,in general ,in connection 2 7,d7 by redesignating subclause 7,,ii7 as clause 7ii7 and indenting appropriately2 and 7,e7 in clause 7ii7 7as so redesignated71 by redesignating items 7aa7 and 7bb7 as subclauses 7,i7 and 7,,ii71 respectively1 and indenting appropriately2 and 7#b7 by inserting after subsection 7c7 the following3 7d7 ,special rules relating to event contracts 7#a7 ,definitions ,in this subsection3 7,a7 ,contingency ,the term contingency means an event or circumstance that may happen1 but is not certain to occur1 including the outcome of another event or circumstance4 7,b7 ,event contract ,the term event contract means a contract for the sale of a commodity for future delivery1 option on such a contract1 or swap based on one or more excluded commodities that is-- 7i7 based upon an occurrence1 extent of an occurrence1 or contingency 7other than a change in the price1 rate1 value1 or levels of a commodity described in section #a;a7#ai77;i772 and 7ii7 listed by a designated contract market or swap execution facility4 7,c7 ,occurrence ,the term occurrence means something that happens1 such as an event1 including the outcome of another event4 7#b7 ,review or approval of event contracts 7,a7 ,in general ,in connection with the listing of event contracts by a designated contract market or swap execution facility1 the ,commission1 on a case-by-case basis1 may determine that an event contract is contrary to the public interest if the event contract is based on an occurrence1 extent of an occurrence1 or contingency involving-- 7i7 activity that is unlawful under any ,federal or ,state law2 7ii7 terrorism2 7iii7 assassination2 7iv7 war2 7v7 violence2 7vi7 gaming2 or 7vii7 other similar activity determined by the ,commission to be contrary to the public interest4 7,b7 ,prohibition ,no event contract determined by the ,commission to be contrary to the public interest under subparagraph 7,a7 may be listed or made available for clearing or trading on or through a registered entity4 7,c7 ,public interest criteria 7i7 ,criteria ,the ,commission shall promulgate such rules and regulations as the ,commission determines appropriate to specify the criteria for determining that event contracts based on the activities described in clauses 7i7 through 7vii7 of subparagraph 7,a7 are contrary to the public interest4 7ii7 ,public interest ,in the rules and regulations promulgated under clause 7i71 the ,commission shall provide that an event contract is likely to be contrary to the public interest if the event contract materially encourages violence or similar unlawful activity4 7iii7 ,public comment ,in promulgating rules and regulations under clause 7i71 the ,commission shall provide not less than a #fj-;day public comment period4 7,d7 ,enhanced certification 7i7 ,format of submissions ,the ,commission shall prescribe by rule or regulation standardized requirements1 as determined by the ,commission1 in addition to the requirements of subsection 7c71 for the format of written certifications of designated contract markets and swap execution facilities for new event contracts pursuant to subsection 7c77#a7 and for voluntary requests for prior approval for new event contracts pursuant to subsection 7c77#d74 7ii7 ,disclosure requirements ,the ,commission shall prescribe by rule or regulation disclosure requirements relating to the material terms and conditions of event contracts that are reasonably designed to promote retail customer readability4 7iii7 ,financial penalty 7,i7 ,in general ,the ,commission may prescribe by rule or regulation a financial penalty for a violation of clause 7i74 7,,ii7 ,considerations ,in determining the amount of a financial penalty assessed under subclause 7,i71 the ,commission shall consider-- 7aa7 the gravity of the violation2 and 7bb7 similar previous violations committed by the designated contract market or swap execution facility4 7,,iii7 ,appeals ,if the ,commission prescribes a financial penalty under subclause 7,i71 the ,commission shall establish a procedure for appealing such penalties1 including in ,federal courts4 7#c7 ,communications with the public 7,a7 ,in general ,in connection with the offer of an event contract to a person that is not an eligible contract participant1 a derivatives clearing organization shall not use any promotional material that-- 7i7 is likely to deceive the public2 7ii7 contains any material misstatement or omission that makes the promotional material misleading2 7iii7 mentions the possibility of profit unless accompanied by an equally prominent discussion of the risk of loss2 7iv7 includes any reference to actual past trading profits without mentioning that past results are not necessarily indicative of future results2 7v7 includes any specific numerical or statistical information about the past performance of any actual account1 unless permitted by the ,commission by rule or regulation2 or 7vi7 includes a testimonial that-- 7,i7 is not representative of all reasonably comparable investors2 7,,ii7 does not prominently state that the testimonial is not indicative of future performance or success2 and 7,,iii7 if applicable1 does not prominently state that it is a paid testimonial4 7,b7 ,rulemaking ,the ,commission shall promulgate such rules or regulations as the ,commission determines to be appropriate to carry out subparagraph 7,a71 consistent with applicable standards for futures commission merchants1 including-- 7i7 relating to records to be made available for examination by the ,commission2 and 7ii7 applicable disciplinary actions or penalties for noncompliance with this paragraph4 7#d7 ,know your customer application 7,a7 ,anti-money laundering compliance program ,in connection with the offer of an event contract to a person that is not an eligible contract participant1 a derivatives clearing organization shall have an anti-money laundering compliance program in place in accordance with section #ecah7;h7 of title #ca1 ,united ,states ,code1 which shall include-- 7i7 internal policies1 procedures1 and controls reasonably designed to achieve compliance with subchapter ,,ii of chapter #ec of title #ca1 ,united ,states ,code1 and chapter #b of title ,i of ,public ,law #ia-ejh 7#ab ,u4,s4,c4 #aiea et seq47 7commonly known as the ,bank ,secrecy ,act7 7including regulations promulgated under that subchapter and chapter72 7ii7 appointment of one or more individuals responsible for implementing and monitoring the program's day-to-day operations2 7iii7 an ongoing training program2 7iv7 independent testing2 7v7 appropriate risk-based procedures for conducting customer due diligence1 including-- 7,i7 understanding the nature and the purpose of developing a customer risk profile2 and 7,,ii7 conducting ongoing monitoring to detect and report suspicious transactions and on a risk basis to maintain and update customer information1 including identifying and verifying beneficial owners2 and 7vi7 appropriate procedures to verify that individual customers have attained the age of #ah years4 7,b7 ,rulemaking ,the ,commission shall promulgate such rules or regulations1 with consideration of the application of the applicable core principles described in this ,act1 as the ,commission determines to be appropriate to carry out subparagraph 7,a71 including-- 7i7 relating to records to be made available for examination by the ,commission2 and 7ii7 applicable disciplinary actions or penalties for noncompliance with this paragraph4 7#e7 ,funds 7,a7 ,segregation required ,in connection with the offer of an event contract to a person that is not an eligible contract participant and accessing a derivatives clearing organization as a direct clearing member1 the ,commission shall promulgate such rules or regulations as the ,commission determines to be appropriate regarding the segregation of member funds from the derivatives clearing organization's own funds4 7,b7 ,customer communication ,a futures commission merchant1 designated contract market1 or swap execution facility shall disclose to event contract customers the relevant risks of loss or potential delay in access to the funds and assets4 7,c7 ,default fund ,for default management purposes1 a derivatives clearing organization shall treat funds held for members and customers solely trading fully collateralized contracts separately from funds held for members and customers trading leveraged contracts4 7,d7 ,rulemaking ,the ,commission shall promulgate such rules or regulations as the ,commission determines to be appropriate to carry out subparagraphs 7,b7 and 7,c74 7#f7 ,advisory ,council on ,consumer ,protection 7,a7 ,establishment ,not later than #ij days after the date of enactment of the ,prediction ,market ,act of #bjbf1 the ,chairman of the ,commission shall establish the ,advisory ,council on ,consumer ,protection 7referred to in this paragraph as the ,advisory ,council74 7,b7 ,chair and ,vice-,chair ,the ,chairman of the ,commission shall appoint a ,chair and ,vice-,chair of the ,advisory ,council from among the members of the ,advisory ,council4 7,c7 ,mission ,the mission of the ,advisory ,council shall be-- 7i7 to provide a forum for regular communication and analysis related to retail investor participation in derivatives markets2 7ii7 to encourage discussions relating to consumer protection regarding event contract markets and related markets2 and 7iii7 to develop recommendations to ensure that markets promote customer protection1 market integrity1 and responsible participation4 7,d7 ,membership ,the ,advisory ,council shall be composed of #ae members1 who shall be appointed by the ,chairman of the ,commission and shall include-- 7i7 the ,retail ,advocate described in paragraph 7#g77;,c72 7ii7 not fewer than #c ,state attorneys general2 7iii7 subject matter experts in behavioral science and health1 financial risk1 and consumer finance2 and 7iv7 representatives of-- 7,i7 the ,office of ,customer ,education and ,outreach2 7,,ii7 the ,department of ,justice2 7,,iii7 ,state and local law enforcement2 7,,iv7 ,state and local regulatory agencies1 as appropriate2 7,v7 market operators2 and 7,,vi7 market participants4 7,e7 ,duties ,the duties of the ,advisory ,council shall include-- 7i7 meeting not less frequently than once every #abj days1 in a manner to be determined by the ,chairman of the ,commission1 to provide independent advice and recommendations to the ,commission and ,congress2 7ii7 identifying policies to promote retail customer protection and specific gaps in investor protections for retail customers2 7iii7 assessing the viability of a self-exclusion program1 which would allow a customer to be voluntarily prohibited from entering into an event contract2 7iv7 assessing the viability of a program to implement voluntary deposit and trade limits2 7v7 reviewing the considerations of the retail customer profile1 including age1 income1 and behavioral vulnerabilities1 when assessing investor protection2 7vi7 studying behavioral prompts and marketing features designed to engage customers in connection with the offer of an event contract2 7vii7 reviewing the effectiveness of existing legal or regulatory recommendations to improve customer protections in connection with the offer of an event contract2 and 7viii7 evaluating the design1 accessibility1 and use of mobile applications1 smartphones1 and other personal electronic devices in connection with the offer of event contracts4 7,f7 ,reports ,the ,advisory ,council shall-- 7i7 not later than #ahj days after the date of enactment of the ,prediction ,market ,act of #bjbf1 submit to ,congress an initial report with analysis and recommendations regarding matters studied under subparagraph 7,e71 which shall include consumer protection1 market integrity1 investor profile1 marketing features1 and other related topics2 and 7ii7 twice each year thereafter1 submit to ,congress a report containing findings1 and recommendations for legislation1 regulations1 and oversight1 relating to the matters studied under subparagraph 7,e74 7,g7 ,review by ,commission ,the ,commission shall-- 7i7 review the findings and recommendations of the ,advisory ,council2 and 7ii7 make publicly available a report containing an assessment by the ,commission of any findings and recommendations of the ,advisory ,council4 7#g7 ,office of the ,retail ,advocate 7,a7 ,definitions ,in this paragraph3 7i7 ,chairman ,the term ,chairman means the ,chairman of the ,commission4 7ii7 ,office ,the term ,office means the ,office of the ,retail ,advocate established by subparagraph 7,b74 7iii7 ,retail participant ,the term retail participant means a person that-- 7,i7 is not an eligible contract participant2 and 7,,ii7 is participating in a designated contract market4 7,b7 ,office established ,there is established within the ,commission the ,office of the ,retail ,advocate4 7,c7 ,retail ,advocate 7i7 ,in general ,the ,retail ,advocate shall-- 7,i7 report directly to the ,commission2 and 7,,ii7 be appointed by the ,chairman from among individuals with experience in advocating for the interests of retail participants4 7ii7 ,compensation ,the annual rate of pay for the ,retail ,advocate shall be equal to the highest rate of annual pay for other senior executives who report to the ,chairman4 7,d7 ,functions of the ,retail ,advocate ,the ,retail ,advocate shall-- 7i7 assist retail participants in resolving significant problems relating to transactions2 7ii7 analyze the potential impact on retail participants of proposed regulations of the ,commission2 7iii7 to the extent practicable1 propose to the ,commission changes in the regulations or orders of the ,commission that may be appropriate to promote the interests of retail participants2 7iv7 conduct research to identify and understand issues that affect retail participants2 and 7v7 operate with and provide assistance to the ,office of ,customer ,education and ,outreach to conduct initiatives and outreach for retail participants4 7,e7 ,access to documents 7i7 ,in general ,at the discretion of the ,chairman1 the ,retail ,advocate shall have full access to the documents of the ,commission as necessary to carry out the functions of the ,office4 7ii7 ,effect ,nothing in this subparagraph authorizes the ,retail ,advocate1 or staff of the ,office1 to have access to1 or to release publicly or internally within the ,commission1 proprietary or sensitive market data1 including data and information that would separately disclose the business transactions or market positions of any person and trade secrets or names of customers1 consistent with section #h4 7iii7 ,policies and procedures ,the ,office shall establish and make public on the website of the ,commission policies and procedures to safeguard the confidentiality of any documents the ,retail ,advocate or staff of the ,office has access to4 7,f7 ,annual report on objectives and activities 7i7 ,in general ,not later than ,september #cj of each year1 the ,retail ,advocate shall submit to ,congress a report describing the objectives and activities of the ,retail ,advocate for the following fiscal year4 7ii7 ,contents ,each report required under clause 7i7 shall include-- 7,i7 appropriate statistical information and full and substantive analysis2 7,,ii7 information on steps that the ,retail ,advocate has taken during the reporting period to improve-- 7aa7 services to and communication with retail participants2 and 7bb7 the responsiveness of the ,commission2 7,,iii7 a summary of the most serious problems reported to the ,office or the ,commission by retail participants during the reporting period2 7,,iv7 an inventory of the items described in subclause 7,,iii7 that includes-- 7aa7 identification of any action taken by the ,commission and the result of that action2 7bb7 the period of time that each item has remained on the inventory2 and 7cc7 for items with respect to which no action has been taken1 the reasons for inaction1 and an identification of any official who is responsible for the action2 7,v7 recommendations for such administrative and legislative actions as may be appropriate to resolve problems encountered by retail participants2 and 7,,vi7 any other information1 as determined appropriate by the ,retail ,advocate4 7iii7 ,confidentiality ,no report required under clause 7i7 may contain confidential information4 7,g7 ,ombudsman 7i7 ,appointment ,not later than #ahj days after the date on which the first ,retail ,advocate is appointed under subparagraph 7,c77i77,,ii71 the ,retail ,advocate shall appoint an ,ombudsman1 who shall report directly to the ,retail ,advocate4 7ii7 ,duties ,the ,ombudsman appointed under clause 7i7 shall-- 7,i7 act as a liaison between the ,commission and any retail participant in resolving problems the retail participant may have with the ,commission2 7,,ii7 review and make recommendations regarding policies and procedures to encourage persons to present questions to the ,retail ,advocate regarding compliance with this ,act2 and 7,,iii7 establish safeguards to maintain the confidentiality of communications between the persons described in subclause 7,,ii7 and the ,ombudsman4 7iii7 ,limitation 7,i7 ,personnel ,in carrying out the duties of the ,ombudsman under clause 7ii71 the ,ombudsman shall utilize personnel of the ,commission1 to the extent practicable4 7,,ii7 ,effect ,nothing in this clause shall be construed as replacing1 altering1 or diminishing the activities of any ombudsman or similar office of any other agency4 7iv7 ,report on activities 7,i7 ,in general ,the ,ombudsman shall submit to the ,retail ,advocate an annual report that describes the activities and evaluates the effectiveness of the ,ombudsman during the preceding #a-year period4 7,,ii7 ,submission ,the ,retail ,advocate shall include the report required under subclause 7,i7 in the reports required to be submitted by the ,retail ,advocate under subparagraph 7,f74 7#h7 ,rule of construction ,nothing in this subsection may be construed to affect-- 7,a7 the ability of a ,state to investigate and bring enforcement actions under this ,act1 including pursuant to section #f;d2 or 7,b7 the jurisdiction of the ,commission described in section #b7;a77#a77;,a74 4 #c4 ,insider trading and manipulation 7a7 ,prohibition on ,members of ,congress trading event contracts ,section #d;c7a77#c7 of the ,commodity ,exchange ,act 7#g ,u4,s4,c4 #f;c7a77#c77 is amended-- 7#a7 by striking under section #b of the ,,stock ,act7 each place it appears and inserting in section #b of the ,,stock ,act 7#e ,u4,s4,c4 #acaja note2 ,public ,law #aab-aje772 7#b7 by redesignating subparagraphs 7,a7 through 7,c7 as clauses 7i7 through 7iii71 respectively1 and indenting appropriately2 7#c7 in the matter preceding clause 7i7 7as so redesignated71 by striking ,it shall and inserting the following3 7,a7 ,in general ,it shall 2 and 7#d7 by adding at the end the following3 7,b7 ,prohibition on ,members of ,congress and executive branch officials trading event contracts ,it shall be unlawful for any ,member of ,congress 7as defined in section #b of the ,,stock ,act 7#e ,u4,s4,c4 #acaja note2 ,public ,law #aab-aje771 the ,president1 the ,vice ,president1 or any officer or employee described in sections #ecab through #ecaf of title #e1 ,united ,states ,code1 to enter into an event contract 7as defined in section #e;c7d77#a774 4 7b7 ,rules or regulations ,the ,commodity ,futures ,trading ,commission 7referred to in this section as the ,commission7 shall promulgate such rules or regulations as the ,commission determines to be appropriate to carry out the amendments made by subsection 7a74 7c7 ,review of insider trading ,the ,commission shall-- 7#a7 determine whether the rules and regulations of the ,commission relating to insider trading should be revised or updated to require designated contract markets1 swap execution facilities1 and futures commission merchants to establish enhanced measures reasonably designed to detect and deter insider trading involving event contracts 7as defined in subsection 7d77#a7 of section #e;c of the ,commodity ,exchange ,act 7#g ,u4,s4,c4 #g;a-#b772 and 7#b7 implement any relevant revisions or updates resulting from the determination under paragraph 7#a74 7d7 ,financial literacy ,the ,commission shall conduct1 through the ,office of ,customer ,education and ,outreach1 financial literacy and customer education activities specific to retail investor activity related to event contracts 7as defined in subsection 7d77#a7 of section #e;c of the ,commodity ,exchange ,act 7#g ,u4,s4,c4 #g;a-#b774 #d4 ,innovation ,advisory ,committee ,section #b7;a7 of the ,commodity ,exchange ,act 7#g ,u4,s4,c4 #b7;a77 is amended by adding at the end the following3 7#af7 ,innovation ,advisory ,committee 7,a7 ,in general ,there is established the ,innovation ,advisory ,committee 7referred to in this paragraph as the ,committee7-- 7i7 to facilitate discussion and communication on matters of concern to exchanges1 firms1 end-users1 and regulators regarding innovation in the derivatives and commodity market and the regulation of those markets by the ,commission2 and 7ii7 to advise the ,commission on the matters described in clause 7i74 7,b7 ,members ,the ,commission shall appoint members to the ,committee with a wide diversity of opinions relating to the matters described in subparagraph 7,a77i7 and who represent a broad spectrum of interests1 including-- 7i7 market makers2 7ii7 derivative end-users2 7iii7 futures commission merchants2 and 7iv7 market operators4 7,c7 ,activities ,the ,committee shall-- 7i7 conduct public meetings at such intervals as are necessary to carry out the functions of the ,committee1 but not less frequently than #b times per year2 7ii7 submit reports and recommendations to the ,commission2 and 7iii7 otherwise facilitate discussion and communication on the matters described in subparagraph 7,a77i74 7,d7 ,terms ,members of the ,committee shall be appointed to #c-year terms1 but may be removed for cause by vote of the ,commission4 7,e7 ,reimbursements ,a member of the ,committee shall be allowed travel expenses1 including per diem in lieu of subsistence1 at rates authorized for employees of agencies under subchapter ,i of chapter #eg of title #e1 ,united ,states ,code1 while away from their homes or regular places of business in the performance of services for the ,committee4 7,f7 ,chapter #aj of title #e1 ,united ,states ,code ,the ,committee shall not be subject to chapter #aj of title #e1 ,united ,states ,code4 7,g7 ,termination ,the ,commission may terminate the ,committee if the ,commission determines that such termination is appropriate4 4 #e4 ,studies 7a7 ,definitions ,in this section3 7#a7 ,commission ,the term ,commission means the ,commodity ,futures ,trading ,commission4 7#b7 ,event contract ,the term event contract has the meaning given the term in subsection 7d77#a7 of section #e;c of the ,commodity ,exchange ,act 7#g ,u4,s4,c4 #g;a-#b74 7b7 ,study on event contracts 7#a7 ,study ,the ,commission shall conduct a study on event contracts that includes-- 7,a7 the size and structure of event contract markets2 7,b7 the growth of event contract listings by contract markets designated under the ,commodity ,exchange ,act 7#g ,u4,s4,c4 #a et seq47 and swap execution facilities 7as defined in section #a;a of that ,act 7#g ,u4,s4,c4 #a;a772 7,c7 the characteristics of the market structure and liquidity formation in event contracts related to-- 7i7 weather2 7ii7 technology2 7iii7 science2 7iv7 economics2 7v7 government data2 7vi7 cultural events2 7vii7 political events2 7viii7 sports2 or 7ix7 a particular word or phrase to be potentially mentioned by one or more persons in an oral or written statement1 speech1 briefing1 address1 or other form of communication2 7,d7 the types of trader or intermediary conduct unique to event contracts and markets that should be closely monitored or given special consideration2 and 7,e7 the provisions of the ,commodity ,exchange ,act 7#g ,u4,s4,c4 #a et seq47 that prohibit fraud1 manipulation1 disruptive trading1 or other similar conduct and apply to activities outside the ,united ,states related to event contracts4 7#b7 ,report ,not later than #a year after the date of enactment of this ,act1 the ,commission shall submit to ,congress and publish on a publicly available website of the ,commission a report on the findings of the study required under paragraph 7#a74 7c7 ,joint ,securities and ,exchange ,commission and ,commodity ,futures ,trading ,commission study 7#a7 ,study ,the ,securities and ,exchange ,commission and the ,commission shall conduct a joint study on event contracts that includes-- 7,a7 the nature of event contracts that could be in the jurisdiction of the ,securities and ,exchange ,commission2 7,b7 the harmonization efforts of the ,securities and ,exchange ,commission and the ,commission relevant to event contracts2 and 7,c7 the nature1 size1 role1 and use of decentralized blockchain applications to offer event contracts4 7#b7 ,report ,not later than #ae months after the date of enactment of this ,act1 the ,commission shall submit to ,congress and publish on a publicly available website of the ,commission a report on the findings of the study required under paragraph 7#a74 #f4 ,authorization of appropriations2 funding for event contract oversight 7a7 ,in general ,there is authorized to be appropriated to the ,commodity ,futures ,trading ,commission #cj1jjj1jjj for each fiscal year of #bjbg through #bjca1 to remain available until expended1 for the purposes of-- 7#a7 implementing this ,act and the amendments made by this ,act2 and 7#b7 developing policies1 rules1 and guidance relating to event contracts4 7b7 ,use of funds ,amounts made available pursuant to subsection 7a7 may be used for-- 7#a7 oversight1 supervision1 and enforcement of event contract markets2 7#b7 rulemakings1 reviews1 and determinations required under subsection 7d7 of section #e;c of the ,commodity ,exchange ,act 7#g ,u4,s4,c4 #g;a-#b72 7#c7 the studies and reports required under section #e2 7#d7 the establishment and operation of the ,office of the ,retail ,advocate under subsection 7d77#f7 of section #e;c of the ,commodity ,exchange ,act 7#g ,u4,s4,c4 #g;a-#b72 and 7#e7 the development of technological1 surveillance1 and data analysis capabilities of the ,commodity ,futures ,trading ,commission4 7c7 ,definition of event contract ,in this section1 the term event contract has the meaning given the term in subsection 7d77#a7 of section #e;c of the ,commodity ,exchange ,act 7#g ,u4,s4,c4 #g;a-#b74