Comment on CFTC-2026-1189, CFTC-2026-1189-0001, Rohan, Rathod

I write as a quantitative trader and market maker with a decade of experience across derivatives and market microstructure, currently founder of Polaris, a financial-research platform. I have published analysis of prediction-market structure at rohanrathod.ai/writing/insider-proof-prediction-markets. The proposed three-step framework evaluates permissibility primarily by the subject matter of the underlying event — whether it "involves" an enumerated activity, and topic-level public-interest factors. Respectfully, subject matter is the wrong primary axis. The economically meaningful risk in an event contract is its information structure: whether a discrete set of persons can know or influence the outcome before public resolution. The microstructure is unforgiving on this point. A binary contract paying $1 on a discrete event is the purest adverse-selection instrument in markets. Under standard sequential-trade analysis (Glosten-Milgrom), the break-even spread scales with the informed share of order flow applied to the full notional — an insider in an event market holds not a better estimate but the answer itself, and unlike in equities, that edge does not decay through price impact as it is traded. No market design neutralizes this: an automated market maker's bounded loss is simply a budget the informed trader collects, and maker rebates on an order book merely relocate the cost. Surveillance can deter identifiable insiders; it cannot change what the trade is worth. This suggests an administrable improvement: make susceptibility to material non-public foreknowledge an explicit, general public-interest factor in Appendix F. Contracts resolving on aggregate or statistical outcomes with no controlling insider — weather, macroeconomic prints, season-level sports statistics — are structurally low-risk regardless of topic. Contracts resolving on discrete decisions or actions knowable in advance by participants — a specific appointment, a corporate action, an officiating call, the timing of a governmental or military decision — are structurally high-risk even within otherwise permitted topics. The proposal already gestures at this axis in its treatment of sports (aggregate outcomes more permissible than discrete in-game actions); I recommend elevating that intuition into a general, named factor applied to every contract, in place of reliance on topic categories that map poorly onto where insider advantage actually lives. Rohan Rathod Quantitative trader and market maker; Founder, Polaris London, United Kingdom rohanrathod.ai