Federally regulated prediction market platforms can not only self-certify new markets. They can also self-certify exchange rules, which could play into unanswered questions about Polymarket’s re-entry to the U.S. market.
Rule 40.6 governs the self-certification of rules for Designated Contract Markets (DCMs). On July 31, Coinbase submitted a rule for creating block trade terms on some of its crypto contracts, allowing large-volume trades for institutional investors. Prediction market exchange Kalshi submitted a rule in late July changing its routine maintenance times.
These self-certifications are routine, but the process raises questions around QCEX, the exchange that Polymarket bought for a clear path back to the United States. Will QCEX, Polymarket’s U.S.-facing platform, use the same market resolution method that has sparked controversy and outcry in the trading community?
Polymarket’s resolution system in question
Upon operating in the United States, QCEX can self-certify Polymarket’s event contracts and resolution rules, as long as they are in accordance with CFTC regulations. Whether Polymarket will attempt to bring its current market resolution system to the United States in the wake of its recent scandals remains an open question.
The most recent resolution dispute was in Polymarket’s market on whether Ukrainian President Volodymyr Zelenskyy would wear a suit by July 2025. Zelenskyy wore a non-traditional suit to the NATO summit in June, which arguably should have resolved the market to “Yes.” Instead, a group of wealthy traders resolved the market to “No,” profiting themselves at the expense of the traders who bet correctly.
That maneuver was possible because Polymarket uses the UMA Oracle to settle its markets. Traders vote based on how many UMA tokens they hold. Since UMA is a cryptocurrency, the largest UMA holders have the most votes, so they can overrule the majority of smaller traders and essentially manipulate market outcomes to their liking.
In contrast, Kalshi has “sole discretion” in how it interprets a contract’s terms and conditions. It maintains control over market resolution instead of using a community of users to decide how a market should settle. While not immune from controversy or irate traders, Kalshi’s system has not led to the resolution debacles Polymarket has experienced.
Limits of self-certification
One of the decisions that Polymarket/QCEX will have to make is how event contracts are resolved in its U.S. exchange. According to Polymarket, “We anticipate rolling out a new reward and oracle-resolution system later this year.” QCEX could follow Kalshi’s approach to resolving markets or self-certify the UMA Oracle system, or something like it, under Rule 40.6.
If they do attempt to port in a version of their current system, recent market resolution scandals could prompt the CFTC to jump in as a backstop. The CFTC could request a stay to review a self-certification of Polymarket’s resolution criteria in response to concerns about market fairness.
However, that would require the CFTC to catch the filing and react to it. Self-certification involves submitting a digital form outlining how a rule change complies with CFTC regulations.
Recent layoffs at the agency have raised questions about the agency’s bandwidth as it prepares to add cryptocurrency regulation to its responsibilities. Trump allies who oppose Brian Quintenz’s nomination to chair the agency have pointed to his admission that the CFTC would need additional staff and funding to properly expand its oversight.
As prediction markets become more popular financial products, the industry and its regulator will have to decide where key policy lines are drawn. Many of those decisions will be made in Rule 40.6 filings.
