S.F. 2494 Section 1. NEW SECTION . 68B.9 Prohibition on buying 1 or selling event-driven contracts relating to legislative or 2 governmental actions. 3 A public employee, public official, or lobbyist, or an 4 immediate family member of the public employee, public 5 official, or lobbyist, shall not buy or sell an event-driven 6 contract on a designated contract market relating to state or 7 local legislative actions or other governmental actions. As 8 used in this section, “event-driven contract” and “designated 9 contract market” mean the same as defined in section 99H.1. 10 Sec. 2. Section 68B.34, Code 2026, is amended to read as 11 follows: 12 68B.34 Additional penalty. 13 In addition to any penalty contained in any other provision 14 of law, a person who knowingly and intentionally violates a 15 provision of sections 68B.2A through 68B.8 68B.9 , sections 16 68B.22 through 68B.24 , or sections 68B.35 through 68B.38 17 is guilty of a serious misdemeanor and may be reprimanded, 18 suspended, or dismissed from the person’s position or otherwise 19 sanctioned. 20 Sec. 3. NEW SECTION . 99H.1 Definitions. 21 1. “Consumer” means an individual who is a resident of this 22 state. 23 2. “Designated contract market” means a digital marketplace 24 for trading event-driven contracts that is also regulated by 25 the federal commodity futures trading commission. 26 3. “Economic indicators” means a statistic or data point 27 about an economic activity that allows an analyst to assess 28 current economic performance. 29 4. “Event-driven contract” means a financial derivative 30 traded on a designated contract market that provides a fixed 31 binary payout based upon the occurrence or nonoccurrence of a 32 specific future event that is contingent upon and determined 33 solely by the definitive outcome of a verifiable specific event 34 or external measure rather than being based upon the continuous 35 -1- LSB 6960SV (1) 91 jm/jh 1/ 11

S.F. 2494 fluctuation of a security price, commodity value, or interest 1 rate that may or may not correlate with traditional market 2 prices or broad economic measures. An “event-driven contract” 3 is limited to those financial derivatives that provide a fixed 4 binary payout related to sporting activities, lotteries, 5 elections, legislative actions, and economic indicators. 6 5. “Settlement source” means an entity from which the 7 designated contract market obtains or sources information for 8 the purpose of determining the outcome of an event-driven 9 contract. 10 6. “Sporting activities” means the outcome of a sporting 11 event, outcomes with the event, or outcomes surrounding the 12 event. 13 7. “Statewide telephone number” means a telephone number 14 authorized by the department of health and human services that 15 provides gambling information. 16 8. “Trade” means a format in which a trader submits an 17 offer to buy a position on a designated contract market at a 18 specific price or range of prices or offers to sell a position 19 at a specific price or range of prices, with market prices 20 determined through the matching of the offers. 21 9. “Trader” means any person buying or selling event-driven 22 contracts on a designated contract market. 23 Sec. 4. NEW SECTION . 99H.2 Age restrictions. 24 1. A designated contract market shall not permit a consumer 25 under twenty-one years of age to register or otherwise open an 26 account, trade, or be a trader of an event-driven contract on 27 the designated contract market. 28 2. If a designated contract market has inadvertently 29 permitted a consumer under twenty-one years of age to register, 30 trade, or otherwise become a trader, the designated contract 31 market shall immediately suspend the account, close all 32 positions of the account, pay out to the consumer any funds in 33 the account, and prohibit the consumer under twenty-one years 34 of age from trading until the consumer has attained twenty-one 35 -2- LSB 6960SV (1) 91 jm/jh 2/ 11

S.F. 2494 years of age. 1 Sec. 5. NEW SECTION . 99H.3 Exclusions from trading. 2 1. A designated contract market shall maintain and enforce 3 policies to exclude certain persons from trading including the 4 following: 5 a. (1) A consumer who voluntarily self-excludes from 6 trading. 7 (2) A designated contract market shall establish a process 8 to allow a consumer to voluntarily self-exclude being a trader. 9 The process shall provide that an initial request by a consumer 10 to be voluntarily excluded shall be for a period of five years 11 or life and any subsequent request following any five-year 12 period shall be for a period of five years or life. The process 13 established shall also require a consumer requesting to be 14 voluntarily excluded be provided information compiled by the 15 department of health and human services on gambling treatment 16 options. The state and any designated contract market shall 17 not be liable to any person for any claim which may arise from 18 this process. In addition to any other penalty provided by 19 law, any money or thing of value that has been obtained by, 20 or is owed to, a voluntarily excluded consumer as a result 21 of trades made by the consumer after the consumer has been 22 voluntarily excluded shall be forfeited by the consumer and 23 shall be credited to the general fund of the state. 24 (3) If a consumer voluntarily self-excludes, the designated 25 contract market must immediately block the access of the 26 consumer to trade and take reasonable steps to prevent the 27 consumer from creating new accounts. 28 b. Any officer, director, employee, or agent of the 29 designated contract market, or any family member of such a 30 person. 31 c. Any officer, director, employee, or agent of a source 32 settlement provider, or any family member of such a person. 33 d. Any person who has insider information on a particular 34 event-driven contract. 35 -3- LSB 6960SV (1) 91 jm/jh 3/ 11

S.F. 2494 e. Any person prohibited pursuant to section 68B.9. 1 2. Any exclusion shall be enforced by the designated 2 contract market until the purpose for the exclusion no longer 3 applies. 4 Sec. 6. NEW SECTION . 99H.4 Settlement sources. 5 1. A designated contract market shall maintain a 6 comprehensive list of all settlement sources that are used to 7 determine outcomes of the event-driven contracts and shall make 8 the list readily accessible to consumers at all stages of the 9 registration process. 10 2. Each designated contract market shall display on every 11 section of the internet site of the designated contract market 12 in which a trade may be made the settlement source for the 13 settlement of the trade. 14 3. A designated contract market shall not settle any trade 15 based upon proprietary or confidential information. 16 Sec. 7. NEW SECTION . 99H.5 Limitations on trading. 17 1. Each designated contract market shall implement and 18 adhere to responsible trading measures to protect consumers who 19 may be at risk of at-risk trading behaviors. 20 2. The measures shall include all of the following: 21 a. Allowing a consumer to set daily, weekly, or monthly 22 limits on the amount that can be deposited into an account or 23 spent on trading. 24 b. Implementing features that allow consumers to limit the 25 amount of time spent on the internet site of the designated 26 contract market, including periodic notifications that remind 27 consumers of how long the consumer has been active on the 28 designated contract market, and the net winnings or losses 29 during the session of trading. 30 c. Posting clearly the statewide telephone number and other 31 extensive responsible gaming features including the ability to 32 self-exclude pursuant to section 99H.3. 33 d. Requiring all advertisements and marketing materials to 34 include an at-risk trading message and the statewide telephone 35 -4- LSB 6960SV (1) 91 jm/jh 4/ 11

S.F. 2494 number. 1 Sec. 8. NEW SECTION . 99H.6 Advertising. 2 1. Every designated contract market shall comply with the 3 advertising standards set forth in this section. 4 2. Advertisements by a designated contract market shall not 5 do the following: 6 a. Send push notifications to consumers which pertain to 7 bonuses on trades the consumer has not taken a position on. 8 b. Depict persons under twenty-one years of age, except 9 incidentally. 10 c. Target consumers under twenty-one years of age. 11 d. Target consumers in a manner that is calculated to reach 12 consumers that have voluntarily self-excluded or have engaged 13 in problem gambling. 14 e. Imply trading is risk-free or use similar language. 15 f. Imply endorsement by the state. 16 3. Advertisements by a designated contract market shall do 17 the following: 18 a. Be truthful and not misleading. 19 b. Include the statewide telephone number that is 20 visible for the entire duration of the advertisement, or 21 in circumstances where the advertisement is auditory, the 22 statewide telephone number shall be stated at the beginning and 23 the end of the advertisement. 24 c. Provide consumers with a readily accessible way to opt 25 out of direct marketing, upon the request of the consumer. 26 4. If the designated contract market offers bonuses, free 27 credits, referral rewards, or other promotions to consumers, 28 the terms and conditions of the offers must be described in 29 plain language. 30 5. If a designated contract market uses a third party to 31 promote the designated contract market, the designated contract 32 market is responsible for ensuring the third party complies 33 with the advertising requirements of this section. 34 Sec. 9. NEW SECTION . 99H.7 Extending credit. 35 -5- LSB 6960SV (1) 91 jm/jh 5/ 11

S.F. 2494 A designated contract market shall not permit a consumer to 1 use a credit card or other credit-based product to add funds 2 to an account of the consumer. 3 Sec. 10. NEW SECTION . 99H.8 Restrictions on market making. 4 1. A designated contract market shall not offer an 5 event-driven contract in this state if the designated contract 6 market includes as a liquidity provider or market maker any 7 entity who engages in gaming activities in the normal course of 8 business, whether within or outside the state. 9 2. The prohibition in subsection 1 applies to any affiliated 10 entities, subsidiaries, parent companies, joint ventures, 11 partnerships, agents, employees, or any other entity acting at 12 the direction of, or in cooperation with, or for the financial 13 benefit of the entity acting as a liquidity provider or market 14 maker. 15 Sec. 11. NEW SECTION . 99H.9 Insider trading and market 16 manipulation. 17 1. A designated contract market shall implement 18 commercially reasonable and technically feasible measures 19 to detect and prevent fraudulent or manipulative conduct by 20 traders. 21 2. If the designated contract market detects potential 22 manipulation by traders, the designated contract market 23 shall notify the attorney general, and, if appropriate, law 24 enforcement. 25 Sec. 12. NEW SECTION . 99H.10 Penalties —— injunction. 26 1. The attorney general shall administer this chapter and 27 enforce the provisions of this chapter. 28 2. Any designated contract market that violates any 29 provision of this chapter is subject to civil penalties, not to 30 exceed ten thousand dollars, for each violation. 31 3. If the attorney general determines the designated 32 contract market engaged in a persistent course of conduct in 33 violation of this chapter, the attorney general may impose a 34 civil penalty not to exceed fifty thousand dollars for each 35 -6- LSB 6960SV (1) 91 jm/jh 6/ 11

S.F. 2494 violation. 1 4. a. Whenever the attorney general believes that a 2 designated contract market has engaged in a persistent course 3 of conduct in violation of this chapter, the attorney general 4 may seek injunctive relief or a temporary restraining order 5 pending the outcome of an enforcement proceeding under this 6 chapter. In such an action, any injunctive relief or temporary 7 restraining order granted shall be governed by the applicable 8 Iowa rules of civil procedure. 9 b. Where a designated contract market continues to operate 10 in the state after an order has been granted under paragraph 11 “a” , the designated contract market shall incur a civil 12 penalty in the amount of one million dollars for each day the 13 designated contract market is operating in violation of the 14 order. 15 5. Nothing in this section shall be construed to preclude 16 criminal prosecution under any other law. 17 Sec. 13. NEW SECTION . 99H.11 Internal controls —— 18 reporting. 19 1. Prior to permitting consumers to trade on a designated 20 contract market, the designated contract market shall provide 21 the attorney general with a description of the internal 22 controls implemented by the designated contract market to 23 comply with this chapter including but not limited to age 24 verification, measures to identify the traders, prevention of 25 insider trading or market manipulation, ability to receive 26 and act upon tips related to insider trading or market 27 manipulation, standards used to monitor event-driven contracts 28 and restrictions placed on known violators, monitoring trades 29 within the state boundaries, prevention of unauthorized 30 withdrawals from the account of a trader, the manner 31 event-driven contract funds are segregated from other funds, 32 and the protection of any personal and private information of a 33 trader. 34 2. After receiving the information provided in subsection 35 -7- LSB 6960SV (1) 91 jm/jh 7/ 11

S.F. 2494 1, the attorney general shall have thirty days to approve 1 trading on the designated contract market by consumers, or 2 to request additional information, and if such additional 3 information is requested, the thirty-day time period shall 4 begin anew. 5 3. If, after the approval of the internal controls in 6 subsection 1, the designated contract market changes any of 7 the approved internal controls, the designated contract market 8 shall be required to submit the changes to the attorney general 9 for review at least fifteen days prior to implementing any 10 changes to the internal controls. 11 Sec. 14. NEW SECTION . 99H.12 Rules. 12 The attorney general shall adopt rules pursuant to chapter 13 17A to administer this chapter. 14 EXPLANATION 15 The inclusion of this explanation does not constitute agreement with 16 the explanation’s substance by the members of the general assembly. 17 This bill regulates designated contract markets. 18 The bill defines “designated contract markets” (market) to 19 mean a digital marketplace for trading event-driven contracts 20 that is also regulated by the federal commodity futures trading 21 commission. 22 The bill defines “event-driven contracts” (contract) to 23 mean a financial derivative traded on a designated contract 24 market that provides a fixed binary payout based upon the 25 occurrence or nonoccurrence of a specific future event that is 26 contingent upon and determined solely by the definitive outcome 27 of a verifiable specific event or external measure rather than 28 being based upon the continuous fluctuation of a security 29 price. An “event-driven contract” is limited under the bill 30 to those financial derivatives that provide a fixed binary 31 payout related to sporting activities, lotteries, elections, 32 legislative actions, and economic indicators. 33 The bill requires a market to prohibit a person under 21 34 years of age to trade contracts on the market, and to implement 35 -8- LSB 6960SV (1) 91 jm/jh 8/ 11

S.F. 2494 controls to identify such persons. 1 The bill requires a market to maintain and enforce policies 2 to exclude certain persons from trading including allowing 3 persons to self-exclude from trading contracts. The other 4 persons required to be excluded from trading on the market 5 include (1) officers, employees, and family members of the 6 officers and employees of the market, (2) any person with 7 inside information on a particular contract, (3) any public 8 employee, public official, lobbyist, and family member of such 9 persons trading contracts related to legislation or other 10 governmental actions, and (4) officers, employees, and family 11 members of the officers and employees of the settlement source. 12 The bill defines “settlement source” to mean an entity from 13 which the market obtains or sources information for the purpose 14 of determining the outcome of a contract. 15 The bill requires a market to maintain a comprehensive list 16 of all settlement sources that are used to determine outcomes 17 of the contracts and is required to make the list readily 18 accessible to persons. 19 The bill prohibits a market from settling a trade based upon 20 proprietary or confidential information. 21 The bill requires each market to implement and adhere to 22 responsible trading measures to protect persons who may be 23 at risk of at-risk trading behaviors. The measures include 24 (1) allowing a person to set personal limits on trading, (2) 25 implementing features that allow persons to view the amount of 26 time spent trading, (3) posting clearly the statewide telephone 27 number approved by the department of health and human services 28 related to gambling, and (4) requiring all advertisements to 29 include an at-risk trading message and the statewide telephone 30 number. 31 The bill places limitations on advertising by the markets 32 including limiting push notifications, depictions of persons 33 under 21 years of age, targeting certain at-risk consumers, 34 implying trading is risk-free, and implying endorsement by the 35 -9- LSB 6960SV (1) 91 jm/jh 9/ 11

S.F. 2494 state. 1 The bill requires any offers, bonuses, free credits, 2 referral rewards, or other promotions offered to persons be 3 described in plain language. 4 If a market uses a third party for advertising, the bill 5 specifies the market is responsible for ensuring the third 6 parties comply with the advertising requirements of the bill. 7 The bill prohibits a market from allowing a person to use a 8 credit card or other credit-based product to add funds to any 9 account with the market. 10 The bill prohibits a market to offer a contract if the 11 market includes as a liquidity provider or market maker, any 12 entity who engages in gaming activities in the normal course of 13 business, whether within or outside the state. 14 A market is also required to implement commercially 15 reasonable and technically feasible measures to detect and 16 prevent fraudulent or manipulative conduct by traders. 17 The attorney general is designated to administer and enforce 18 the provisions of the bill. 19 Any market that violates the bill is subject to civil 20 penalties, not to exceed $10,000, for each violation. 21 If the attorney general determines the market engaged in 22 a persistent course of conduct in violation of the bill, the 23 attorney general may impose a civil penalty not to exceed 24 $50,000 for each violation. 25 Whenever the attorney general believes that a market has 26 engaged in a persistent course of conduct in violation of the 27 bill, the attorney general may seek injunctive relief or a 28 temporary restraining order. 29 In situations where a designated contract market continues 30 to operate after an injunction or a temporary order has been 31 issued, the market shall incur a civil penalty in the amount of 32 $1 million for each day the market is operating in violation 33 of the order. 34 A public employee, public official, or lobbyist who trades 35 -10- LSB 6960SV (1) 91 jm/jh 10/ 11

S.F. 2494 state or local legislative actions or other governmental 1 actions on the market is guilty of a serious misdemeanor, 2 and may be dismissed from the person’s position or otherwise 3 sanctioned. 4 Prior to permitting persons to trade on a market in this 5 state, the market shall provide the attorney general with 6 a description of the internal controls implemented by the 7 designated contract market to comply with the bill including 8 but not limited to age verification, measures to identify the 9 traders, prevention of insider trading or market manipulation, 10 ability to receive and act upon tips related to insider trading 11 or market manipulation, monitoring trades within the state 12 boundaries, standards used to monitor event-driven contracts 13 and restrictions placed by known violators, prevention of 14 unauthorized withdrawals from the account of a trader, the 15 manner contract funds are segregated from other funds, and the 16 protection of any personal and private information of a trader. 17 The attorney general is required to adopt rules pursuant to 18 Code chapter 17A to administer the bill. 19 -11- LSB 6960SV (1) 91 jm/jh 11/ 11