Futures Commission Merchant (FCM)

In conventional derivatives markets a retail participant does not face the exchange directly. An FCM takes the order, posts margin to the clearing house and holds customer funds in segregated accounts subject to CFTC rules on custody, capital and reporting. That intermediation is a substantial part of what makes the futures market’s customer protections work, and it is enforced by both the CFTC and the National Futures Association.

Prediction markets have complicated the picture because the largest venues began as direct-to-consumer platforms where the customer holds an account with the exchange itself. That model concentrates functions the traditional structure deliberately separates, and it is one reason the sector’s customer-protection debate looks different from ordinary futures. The distinction became commercially significant when Kalshi obtained a modified designation permitting intermediated futures trading in January 2025, opening the door to brokers routing retail order flow into event contracts. For the gambling industry the FCM question is the one to watch, because a prediction market reachable through an ordinary brokerage app has a distribution advantage no sportsbook can match, and it arrives without any of the state licensing that distribution would otherwise require.