nickgallick SKILL 66: Platform Terms Architecture & Market Rules
Purpose
Build the complete legal document stack for a prediction market platform. Know what each document must contain and the provisions that protect you from the specific lawsuits this type of platform attracts.
Document Hierarchy (All Required at Launch)
- Terms of Service (TOS) — master agreement, all platform use
- Privacy Policy — data collection, use, sharing, rights (CCPA/ICDPA/GDPR compliance)
- Market Rules — how markets operate (resolution, disputes, prohibited conduct)
- Fee Schedule — all fees, clearly disclosed before first transaction
- Risk Disclosures — all risks, prominently displayed (not buried)
- Responsible Participation Policy — self-exclusion, position limits, resources
- API Terms — if offering API access to third parties
- Market Maker Agreement — if using designated market makers
- Affiliate/Referral Program Terms — if offering referral bonuses
Market Rules Document (Most Critical for Prediction Markets)
Market Creation Section
- How markets are proposed, reviewed, and published (platform-only vs. user-created)
- Prohibited market categories (explicit list: terrorism, assassination, specific individuals' health/safety, etc.)
- Market metadata requirements: resolution source, resolution date, resolution criteria, trading deadline — ALL required before market goes live
Trading Rules Section
- Order types available
- Minimum and maximum position sizes (per trade and per market)
- Position limits per user per market (e.g., no more than X% of open interest)
- Margin/collateral requirements (if applicable)
- Trading hours (24/7 or specified hours)
- Fee structure (per trade, percentage, flat fee)
Resolution Rules Section
- Resolution process (oracle-based, committee-based, hybrid — specify)
- Resolution timeline (within X hours of event outcome)
- Source hierarchy (primary → secondary → tertiary → void)
- Dispute process and timeline
- Void conditions (exhaustive list)
- Partial resolution / edge cases
Prohibited Conduct (Explicit List)
- Wash trading
- Spoofing
- Front-running / insider trading (trading on MNPI)
- Market cornering (position limits enforce this)
- Multi-accounting (one person, multiple accounts)
- Collusion (coordinated trading to manipulate prices)
- Automated trading without platform authorization
- Sanctions evasion (trading from prohibited jurisdictions)
- Underage participation (under 18)
Enforcement
- Investigation procedures (platform has sole discretion to investigate)
- Account suspension/termination
- Position liquidation
- Profit disgorgement (clawback of manipulative profits — this is the critical clause)
- Reporting to regulators and law enforcement
- Right to modify rules with [30-day] advance notice
Fee Schedule Requirements
- All fees disclosed BEFORE the user transacts (FTC requirement)
- Trading fees: percentage of trade volume or flat fee per trade
- Withdrawal fees: if any (specify amount and conditions)
- Market creation fees: if user-created markets
- Inactivity fees: if any — disclose clearly and prominently (these generate complaints and regulatory scrutiny)
- Fee changes: minimum 30-day notice before any fee increases
- No hidden fees: if it costs the user anything, it's in this document
Risk Disclosures — Required Content and Placement
Required Statements
- "You may lose your entire deposit"
- "Prediction market outcomes are uncertain"
- "AI predictions may be incorrect" (if AI used)
- "Smart contracts may contain vulnerabilities" (if applicable)
- "Regulatory changes may affect the availability of this platform"
- "Past performance does not guarantee future results"
- "This platform is not regulated by [CFTC/SEC] unless otherwise stated"
- "This is not investment advice"
Required Placement (Not Buried)
- Registration page: before account creation
- Deposit page: before first deposit
- Every page footer: accessible link to full Risk Disclosures
- Market page: abbreviated risk disclosure near "enter position" button
TOS Critical Provisions Checklist
- Arbitration clause (individual, not class, remote, AAA rules)
- Class action waiver (AT&T Mobility v. Concepcion basis)
- Limitation of liability (cap at entry fees paid; no consequential damages)
- AI judging disclaimer ("as-is," no warranty of accuracy)
- Force majeure (comprehensive list including blockchain, oracle, regulatory failures)
- Market pause/void authority (platform's sole discretion)
- Clawback/disgorgement authority (manipulative profits can be seized)
- Governing law (Iowa, or jurisdiction of choice)
- Dispute resolution (exhaust internal process before arbitration)
- Prohibition on assignment (users can't assign their TOS rights)
- No third-party beneficiaries
- Entire agreement clause
- Severability clause
- Modification with notice
Clickwrap vs. Browsewrap
- Always use clickwrap: user must affirmatively click "I agree to the Terms of Service" with a link to the document
- Never use browsewrap: "by using this site, you agree..." (unenforceable in most courts)
- Critical moments for clickwrap: account creation, first deposit, each new major TOS version
- Store clickwrap acceptance records: timestamp, IP address, user ID, TOS version — for 7 years
This is legal research and intelligence, not legal advice. Consult qualified legal counsel before taking action.