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Governments and international organizations worry increasingly about systemic risk, under which the world’s financial system can collapse like a row of dominoes. There is widespread confusion, though, about the causes and even the definition of systemic risk, and uncertainty about how to control it. This Article offers a conceptual framework for examining what risks are truly “systemic,” what causes those risks, and how, if at all, those risks should be regulated. Scholars historically have tended to think of systemic risk primarily in terms of financial institutions such as banks. However, with the growth of disintermediation, in which companies can access capital-market funding without going through banks or other intermediary institutions, greater focus should be devoted to financial markets and the relationship between markets and institutions. This perspective reveals that systemic risk results from a type of tragedy of the commons in which market participants lack sufficient incentive, absent regulation, to limit risk-taking in order to reduce the systemic danger to others. Law, therefore, has a role in reducing systemic risk.