You have 60 days, and the clock is not negotiable

If your firm registered as a futures commission merchant in the last year, your first certified annual report is due 60 days after your fiscal year end. That is Regulation 1.10(b)(1)(ii), and unlike a lot of deadlines in this business it does not move because you are new.

Five prediction market operators cleared registration between September 2025 and July 2026. PrizePicks was first, announcing in September 2025 that its affiliate had become the first company tied to a fantasy sports operator to register. Sleeper, Underdog, Fanatics and DraftKings followed. Almost none of these companies came out of the futures industry. They built consumer products and then found themselves holding customer money under federal rules written decades before the product existed.

Here is what the first one actually involves.

Not every CPA firm can sign it

Start here, because it disqualifies most of the market and firms find that out late.

Regulation 1.16(b)(1) sets three conditions on the accountant who examines a futures commission merchant. The firm has to be registered with the Public Company Accounting Oversight Board. It has to have undergone a Board examination. And it cannot be subject to a bar on examining public issuers or brokers and dealers registered with the Securities and Exchange Commission arising from a Board disciplinary hearing.

Three separate tests, and the middle one is the one that catches people. Registration is a filing. Any firm can submit it. Having actually been through a Board examination is not something a firm can arrange because a client asked in November.

Ask any firm you are considering for all three, and verify them rather than taking the answer. The Board publishes its registered firm list and its enforcement actions publicly. We wrote more about that requirement in why funds need a PCAOB-registered auditor.

What the audit actually covers

More than the financial statements, which surprises firms coming from a straight corporate audit.

Regulation 1.16(d)(1) requires the examination to include a review and appropriate tests of your accounting system, your internal accounting control, and your procedures for safeguarding customer and firm assets. For a futures commission merchant that means the segregation requirements specifically. Your auditor is testing whether customer money is where the rules say it should be, and whether the process that puts it there works.

Then there is a second report most first-year firms do not expect. Regulation 1.16(c)(5) requires the accountant to file, alongside the annual report, a supplemental report describing any material inadequacies found. Regulation 1.16(d)(2) defines what counts: conditions that could reasonably be expected to inhibit prompt completion of transactions, cause material financial loss, cause a material misstatement, or result in violations of the segregation, recordkeeping or financial reporting rules.

Worth knowing that there is no compliance attestation here comparable to what a broker-dealer audit produces under SEC Rule 17a-5. The judgment about what rises to a material inadequacy sits with your auditor, with no separate attestation framework wrapped around it. That is one more reason the choice of firm matters.

Where the time actually goes

Rarely the financial statements. Almost always the customer funds work and the data behind it.

The recurring problem for firms in this sector is that a meaningful share of the underlying data lives in the exchange’s systems rather than your own. Your auditor has to tie customer balances, exchange records and your general ledger to each other. If that reconciliation is a manual project every month, it becomes a very expensive project during fieldwork.

The second time sink is documentation of judgment. Every operator in this sector has made calls about how the segregation computation and the capital requirement apply to a fully collateralized product. If those calls were made in a meeting and never written up, the audit turns into an exercise in reconstructing reasoning from memory, months later, under time pressure. We covered that classification question in more depth in why prediction market customer funds sit in a cleared swaps account.

The two rules that landed mid-year

Both of these hit fiscal years already in progress, and both are easy to miss if you were focused on getting registered.

Regulation 1.25, which governs what you may hold customer funds in, was substantially rewritten effective February 21, 2025. Money market funds are now limited to government funds that do not elect liquidity fees. Foreign sovereign debt from five countries came in, along with short-term Treasury exchange traded funds. Concentration limits changed and new market risk capital charges attach to the added instruments.

Regulation 1.44, on margin adequacy and separate accounts, carried a compliance date of January 22, 2026 for futures commission merchants that are not clearing members. For most firms in this sector that date fell in the middle of a fiscal year.

If nobody at your firm has confirmed where you landed on either, that is a conversation to have before fieldwork rather than during it.

What to have ready 60 days out

Your daily segregation computations for the full year, along with the statements filed under Regulation 1.32, and a clean explanation of any day the numbers moved unusually.

The written analysis supporting your targeted residual interest under Regulation 1.23, dated, with the person who approved it named. The rule asks for enough specificity that the Commission could reproduce the analysis, and that is the standard to write to.

Your depository acknowledgment letters, the reconciliation between exchange records and your general ledger, your risk management program under Regulation 1.11, and your chief compliance officer’s annual report, which is separately due within 90 days of fiscal year end under Regulation 3.3.

And the memos behind your judgment calls. If your firm concluded its contracts are cleared swaps and computed capital accordingly, that reasoning should exist on paper with a date on it.

The thing worth doing in October rather than January

A first audit in this sector is not hard because the accounting is exotic. It is hard because the rules were written for a different product and the answers are not all published yet, which means your firm has to make defensible decisions and be able to show its work.

Firms that sort that out in the quiet part of the year get a clean audit on time. Firms that leave it until fieldwork end up explaining a year of decisions to someone with a deadline.

Michael Coglianese, CPA, P.C. has been registered with the Public Company Accounting Oversight Board since 2009 and audits futures commission merchants, introducing brokers, commodity pool operators, commodity trading advisors and hedge funds. Send us your registration category and fiscal year end and we will map what your first audit needs, what is likely to take longest, and what is worth fixing now rather than in the middle of it.