▶ 0:06:56Committee will come to order. Uh, welcome and thank you for joining today's hearing. Where we will hear from chairman seelig from the commodity futures trading commission. And after a brief opening remarks, members will receive testimony from our witness today, um, so once again, good morning everybody, and welcome to our first hearing with mike seelig, the chairman of the commodity futures trading commission.
▶ 0:07:21Uh, congratulations on your confirmation, chairman. Uh, we are looking forward to a robust conversation today about your agenda for cftc. As we discussed at our reauthorization hearing in december, it is a transformative time for the commission and for financial markets broadly.
▶ 0:07:42Commission has many new questions to grapple with, including the integration of digital assets and blockchains, the increasing participation of retail customers, the growing prevalence of integrated business models and harmonization of rules between financial regulators. Just to name a few. Uh, as it does so, congress gave cftc an explicit statutory purpose to promote, quote, responsible innovation, end quote.
▶ 0:08:11It is the only financial regulator with such a mandate. At the same time, the core mandate of the commission remains unchanging to protect commodity markets and their participants with a system of effective self-regulation overseen by the commission. That is why we know today what we know today as principle based regulation.
▶ 0:08:32I look forward to chairman providing us with his views on these many policy issues, as well as his plans for agency operations and enforcement priorities and reauthorization legislation.
▶ 0:08:51While the rise in prediction markets has created an innovative new class of financial derivatives, it also has spawned significant confusion and debate about the role in the authority of the commission. On the one hand, the commodity exchange act is clear the commission's authority is broad and deep. The definitions of commodity and swap are sweeping, and the commission's authority over transactions on registered exchanges is complete and exclusive.
▶ 0:09:18As we learn from doctor sander sander at our 50th anniversary hearing last year, the original framers of cftc were intentional in providing the commission with broad definitions in an exclusive jurisdiction. But understanding the commission's jurisdiction is not the end of the public policy questions that we must consider.
▶ 0:09:39Many members have raised important questions about the rules for trading event contracts and the appropriateness of certain contracts to be listed for public trading. Importantly, the commission has said has significant tools currently at its disposal to address many of these concerns. Uh, the chairman has already issued has already issued guidance as committed to in issuing a rulemaking using those tools.
▶ 0:10:09And I look forward to discussing those actions further today. Where the commission's authority is found to be insufficient to meet its mandate to support responsible innovation and protect market participants, we will consider legislation as may be appropriate. But first, the committee must understand if such gaps exist. Today's hearing is another step in that process.
▶ 0:10:31The chairman's testimony will help our members to further understand the law and the commission's authority's prediction markets are important and newsworthy. However, they are not the only issue before the commission. Uh, chairman selig's announced agenda for the year is a busy one, touching on a broad cross-section of issues important to the derivatives industry and the american public. And I look forward to exploring it in detail today.
▶ 0:10:57I want to thank the chairman again for coming today, and we look forward to your testimony. With that, I will yield to the ranking member and distinguished congresswoman from minnesota, uh, miss craig, for her opening statement. >> thank you so much, Mr. chairman, and thank you, chairman selig, for being here today. We appreciate it. I'm grateful for the chance to discuss the work of the commodity futures trading commission in the critical areas of consumer protection, market integrity and the stability of our financial system.
▶ 0:11:26For 50 years, the cftc has been the cop on the beat for america's derivatives markets. Markets that touch everything from the price of groceries and gas to how our farmers manage risk out in the field. But today, cftc responsibilities and markets have expanded and become more complex than ever. And that's just in the last few years.
▶ 0:11:51Digital assets and prediction markets have opened new horizons and created new risks, and we cannot expect the agency to keep up. If congress doesn't set the appropriate rules and regulations, as well as give the cftc the staffing, the funding and the tools it needs to do its job well. Let me start with something that should be uncontroversial. The cftc needs to be fully staffed.
▶ 0:12:17We are asking a relatively small agency to oversee enormous, technologically sophisticated markets that operate at the speed of light and in some quarters, 24 hours a day, the agency's workforce is stretched too thin to meet the demands currently placed upon it. And without a sufficient staff, the cftc simply cannot provide the rigorous oversight that consumers and market participants need.
▶ 0:12:43That includes having a full five commissioners in place, as congress intended to ensure that consumers come first, and nonpartisan norms are maintained without being tainted by unnecessary politics. That brings me to my second point. The cftc needs full, stable funding.
▶ 0:13:05Just last year, we heard from industry leaders and commercial end users of traditional commodities markets, farmers, ranchers, cooperatives that stagnant or insufficient funding at the cftc undermines market certainty and raises risks across the system. And that was before digital assets and event contracts. Contract markets exploded in use.
▶ 0:13:29Today, the cftc is effectively the nation's primary regulator of two of the fastest growing and most volatile markets in the country. Digital commodity trading and event based prediction markets. These markets are global, complex and technologically advanced and can be accessed by bad actors using nothing more than a smartphone.
▶ 0:13:53The cftc needs the tools, staff and capacity to respond quickly in this new environment and to hold bad actors accountable. We've all watched the growth of event prediction platforms, where markets where people can wager on outcomes ranging from march madness to geopolitical crises.
▶ 0:14:16In recent months, we've even seen alleged insider trading on platforms like polymarket and other offshore entities, where individuals reportedly made enormous profits betting on political events, including a coup in venezuela and the war in iran. When people can gamble on war or political instability and potentially use nonpublic or sensitive information to do it, that crosses a red line.
▶ 0:14:44We also need a full review of whether these platforms violate local and state gaming laws. And keep in mind that the unique role that tribal governments play in this space as well. This is exactly why we need strong rules, regulations, clear guardrails and consumer protections, and why we need the cftc fully equipped to enforce these protections.
▶ 0:15:12Consumers operate in fast moving digital assets, markets or prediction platforms. They deserve transparency, fairness and safety. They deserve a referee who's on the field, not one sitting on the sidelines because congress didn't fund the agency adequately. At the end of the day, protecting consumers and maintaining market integrity is not a partizan issue. It's not an industry issue either.
▶ 0:15:38It's a stability issue, a fairness issue, and, frankly, a basic responsibility of this committee. So my message today is straightforward. If we want safe markets, if we want innovation without exploitation, if we want risk management tools that serve main street as well as wall street, then we must give the cftc, the staff, the funding and the clear statutory authority it needs to do its job.
▶ 0:16:06And we need a cftc committed to protecting consumers first. Again, I want to thank chairman selig for being here today. I look forward to the discussion. And with that, Mr. chairman, I yield back. >> I thank the gentlelady. The chair would request that other members submit their opening statements for the record so our witness may begin his testimony. Ensure that there is ample time for questions. I'm pleased to welcome to the committee our witness for today, cftc chairman michael susie lee.
▶ 0:16:35Chairman, thank you for joining us. We will now proceed to your testimony. You'll have five minutes. The timer in front of you will count down to zero, at which point your time has expired. Chairman, please begin whenever you're ready. >> chairman thompson, ranking member craig and members of the committee, thank you for the opportunity to testify here today. Just over 100 days ago, I was sworn in as the 16th chairman of the commodity futures trading commission.
▶ 0:17:03During my confirmation hearing, I pledged to work tirelessly as chairman to maintain the agency's stature as a world class financial markets regulator. I committed to protect and provide regulatory relief to our farmers, ranchers and producers, roll back outdated rules and regulations, and modernize the agency to keep pace with the rapid speed of innovation. I'm pleased to report I've made significant progress on these goals since rejoining the agency last december.
▶ 0:17:29One of my first priorities, upon taking charge of the agency, was identifying regulations to prevent farmers, ranchers and producers from accessing our derivatives markets. My staff have been working diligently to rightsize cumbersome rules so that even our smallest producers can properly manage risk. I've also revived the agency's annual agriculture convention, known as aggiecon, to bring together leaders from government, business and academia to discuss the most pressing issues in our agricultural markets.
▶ 0:17:58Most importantly, I'll continue to visit with farmers, ranchers and producers across the country to hear from them directly. The agriculture community is the backbone of this country, and it will always have a seat at the table in this administration. Another key priority is to lower the compliance burdens and energy costs for small businesses. Many of our rules and regulations discourage firms from servicing and trading with the businesses that are most in need of our markets.
▶ 0:18:22The agency is finalizing regulatory relief for firms that transact with energy, agriculture and critical minerals producers to provide access to more market intermediaries and contribute to lower commodity prices. The agency has also taken a leading role in delivering on president trump's mandate to make america the crypto capital of the world.
▶ 0:18:43Importantly, the cftc joined an sec interpretation to provide guidance that resolved significant ambiguities in the marketplace as to which types of crypto assets are securities and which are commodities. We've also worked quickly to provide clarity concerning tokenized collateral, the capital treatment of payment, stablecoins, and the obligations of software developers building in the united states.
▶ 0:19:03I applaud the important work of this committee to deliver bipartisan market structure legislation that will cement clear rules of the road for the millions of americans who use crypto assets each day. I'm optimistic that congress will soon send this landmark legislation to the president's desk.
▶ 0:19:20The agency is also working to provide explicit guidelines and further strengthen investor protections for prediction markets, which offer trading and contract derivatives that are regulated under the exclusive authority of the cftc. Commission staff recently issued a prediction markets advisory and published notice soliciting public input before considering new regulations for these markets.
▶ 0:19:44Now, I'm sure I'll be getting questions about our enforcement efforts related to crypto prediction markets and the commodity derivatives markets more broadly. So I want to be crystal clear to anyone who engages in fraud manipulation or insider trading in any of our markets. We will find you and the full force of the law will come to bear.
▶ 0:20:04Nothing is more important than protecting market integrity, and that's why I've been diligently working to reinvigorate our enforcement division and upgrade our surveillance tools to meet the challenges of our growing markets. None of these accomplishments would have been possible within such a short period of time. Without the agency's talented and experienced career civil servants. I've also brought on new senior leadership who bring a wealth of experience to the agency.
▶ 0:20:31As chairman, I believe it's vital to break from the restrictive regulatory practices of the past and create derivatives markets that work for everyone. Under my leadership, the cftc will administer fit for purpose regulation appropriately tailored to material risks, no more and no less, to ensure that the future of finance is made here in america.
▶ 0:20:50If the past is prolog, the next 100 days and the years beyond will build on this transformative foundation, as the cftc remains the gold standard for smart, effective oversight of our financial markets. Our work here is just getting started. Thank you again, and I look forward to answering your questions. >> chairman, thank you so much for your testimony today.
▶ 0:21:13Uh, at this time, members will be recognized for questions in order of seniority, alternating between majority minority members and in order of arrival. For those who joined after the hearing convened, uh, you'll be recognized for five minutes each in order to allow us for to get to as many questions as possible. I'm going to hold pretty firm for that five minutes because we have, uh, I guess a vote series, uh, before noon today for some reason.
▶ 0:21:41Um, uh, so I recognize myself for, for five minutes. Um, chairman crafting digital asset market structure legislation has been a long, thoughtful process for this committee over a number of years. And your testimony, you expressed optimism that it will reach the president's desk. Uh, where do you see the process on the clarity act in the senate? And how important is it, uh, in your estimation, to get clarity done?
▶ 0:22:12>> thank you, chairman. And as I said in my opening statement, I applaud the efforts of this committee and congress to get bipartisan market structure legislation on the president's desk for signature. And I do believe that this is absolutely essential. We have had too much ambiguity in these markets for way too long. The crypto asset community wants to build here in the united states, and they want to develop technologies that are going to move our country forward, are going to promote innovation and market integrity.
▶ 0:22:39But they have to have solidified legislation on the books that will provide future proof clarity for the markets. I am too concerned that if we do not get this right now, we will continue to see the lack of certainty, consumer protection and clarity in these markets that will just drive builders and innovators offshore. So I very much applaud the efforts of this committee to get legislation finalized that will distinguish between securities commodities and also provide the investor protections, consumer protections that the american people deserve.
▶ 0:23:12>> thank you. Chairman. Uh, chairman, discussion around prediction markets feels a lot like the discussion around digital asset felt several years ago. These markets are popular. They're newsy and somewhat controversial. But unlike digital asset markets there is a crucial difference. Unlike spot digital commodity trading, event contracts are already within the commission's jurisdiction. Nevertheless, there is a significant confusion here about the commission's authority here.
▶ 0:23:41Some stakeholders have described these markets as, quote, unregulated gambling or a loophole, uh, without a clear understanding of the commission's historic jurisdiction, its regulatory posture and the tools it has to oversee these markets. Mindful that I only have a few minutes, can you explain the jurisdiction and the authorities of the commission with respect to event contracts?
▶ 0:24:06>> well, congress wisely granted the cftc very broad, exclusive jurisdiction over commodity derivatives markets, and the commodity exchange act. Ah, authorizing statute has very broad definition of the term commodity. It includes virtually everything except for onions and motion picture box office receipts. And we take that broad authority very seriously when there are new creative instruments that are structured as derivatives, we, of course, have the authority to regulate those to the extent that the underlying asset is a commodity.
▶ 0:24:34And with that broad definition, that's a lot of things. And so we take this responsibility very seriously to police fraud, insider trading and manipulation in the markets. And we are defending that authority in court, as I'm sure this committee is aware, we're involved in some active litigation. So I can't speak to to some of those matters, but rest assured that we will continue to defend the agency's authority to make sure that we police these markets. >> um, so thank you, Mr. chairman.
▶ 0:25:03It's clear that you and your staff are thinking deeply about these these issues. Uh, would you be willing for your staff to give a deep dive briefing into the many jurisdictional and regulatory questions that committee members might have? >> chairman. Absolutely. We'd be happy to provide that briefing. And as you state, these are very complex issues that we as subject matter experts are spending a lot of time on. We'll be happy to educate your staff and others on the committee on. >> very good. Thank you so much.
▶ 0:25:33And I will yield back the balance of my time and recognize the ranking member for five minutes. >> thank you, Mr. chairman. Um, and again, thank you for being here, Mr. secretary. It's my understanding that the agency is currently operating with approximately 543 full time employees, down from 708 at the end of fiscal year 2024. That's a reduction of over 20% of the workforce.
▶ 0:25:59Your budget request to congress only seeks to fund 650 employees at a time when we're seeing continued growth of traditional futures markets, the swaps markets and an emerging digital assets and prediction markets. Do you think it's reasonable to believe that the agency can be effective in 2026 and beyond, with staffing levels significantly less than what the first trump administration had requested? With the increased demands on your time.
▶ 0:26:32>> thank you, ranking member. And yes, I do believe that we are running more efficiently and effectively than ever before, thanks to some of the right sizing of the government that's occurred under this administration, thanks to the president's leadership. And it's absolutely vital that we continue to monitor, surveil, and police our markets. And we are doing just that. We are utilizing new tools from ai to automation and other surveillance systems that we're building out. And we take this responsibility very seriously.
▶ 0:26:59I assure you, we have ranked up in terms of our staff. I will say that the resumes speak for themselves. We're hiring very talented people from the private sector as well as talent from throughout the government. So we will continue to build up our staff. We have job postings on usa jobs today and are actively looking for folks, but it's absolutely critical that we have the funding and resources to continue to monitor and surveil our markets.
▶ 0:27:27>> I'm going to resist the temptation to argue with you on the efficiency and the trump administration, but, um, I'll stick with the cftc here this morning. I'm very concerned about some of the activity going on with prediction markets under your jurisdiction in policing these new prediction markets for fraud manipulation and insider trading. The exchanges were these contracts are traded. Designated contract markets also play a role in policing their own markets.
▶ 0:27:54Can you give us a little more detail about the differences between the activity the cftc engages to police these markets compared to what these prediction market dcms are doing? Is the agency surveilling these markets itself, or is it just overseeing the efforts of the dcms?
▶ 0:28:13>> the commodity exchange act sets forth a regulatory scheme where the exchanges are the first line of defense, their self-regulatory organizations, which means that they have quasi regulatory authority granted to them by the government. These exchanges monitor for activity in their markets, including insider trading, abusive trading practices, fraud and market manipulation. They're also the the first line in reviewing contracts that are listed. So these contracts are typically self-certified with the agency.
▶ 0:28:42The exchange's certifying to us that they're not readily susceptible to manipulation. Among other things, we are the second line. We are always reviewing the activity of these exchanges on a regular basis and reviewing each contract self-certification. We have the ability to reject those contracts. We also have the ability, of course, to work together with the exchanges to police fraud, insider trading and market manipulation. And so we're in regular dialog to learn about what's occurring in these markets. We're surveilling them, the exchanges are surveilling them.
▶ 0:29:11And we're, of course, working with law enforcement where appropriate as well. So it's a comprehensive scheme where we have multiple levels of review of each contract and various activities in the markets, and we will continue to work together with the exchanges to make sure that the markets are well functioning. >> Mr. chairman, how many you mentioned you have the ability to reject these contracts. Do you know, off the top of your head, under your leadership, how many of these contracts have been rejected?
▶ 0:29:40>> ranking member we regularly reject contracts. I don't have the exact number in front of me, but what I will say is that under the prior administration, there was a lack of clarity on a lot of these contracts, and the floodgates really opened. And I inherited a lot of these contracts when I took office just over a hundred days ago. So we're actively reviewing what's out there. We're making sure there's clear guidelines and guidance, and we've submitted for the record, actually, our advanced notice of proposed rulemaking on the topic of prediction markets, which a lot of these new self-certified contracts are within the event contract space.
▶ 0:30:12And so we are soliciting input as to what sorts of standards and guidelines we should have in the marketplace. >> thank you. As you all know, you are the only commissioner at the cftc, a scenario that it is fair to say congress never intended. I talked about this in my opening remarks. Um, can I get your commitment that you will?
▶ 0:30:33Well, number one, can I get your commitment that the trump administration, when it adds commissioners will do so as congress intended on a bipartisan basis, and also your commitment that you won't finalize any new regulations with you as the only sitting commissioner. >> well, of course, the president makes decisions around nominations. And so I look forward to working with whoever the president chooses to nominate.
▶ 0:30:59But in the interim, we cannot, for the sake of the american people, slow down in our rulemaking. It's very important that we get investor protections, consumer protections and safeguards for our markets. And so I cannot, unfortunately, commit to not do my job that I was appointed to do by the president. >> thank you. You just confirmed that you will not stop any regulation when you're the only sitting commissioner. And sadly, I think this points to continued partizanship.
▶ 0:31:30Thank you and I yield back. >> lady's time has expired. Now recognize the gentleman from oklahoma, the chairman emeritus of the house agriculture committee, one of them, Mr. lucas, for five minutes. >> thank you, Mr. chairman, and thank you, chairman selig. It's good to see you again. I want to start off by thanking you for finalizing last year's proposal to expand cross margining to customers. As chairman of the task force on treasury market resilience.
▶ 0:31:58Over on another committee, I've been calling for the cftc and the sec to finalize this proposal and well in advance of the clearing rule's effective date, especially in coordination with the basel re proposals. Changes in netting. Uh, chairman kelly, the treasury market is the most important market in the world. And the last time chairman atkins testified before financial services, he and I agreed that cross marginalizing must be efficient with capital.
▶ 0:32:28How are you working with the prudential regulators through the basel three comment period to ensure that their proposed changes on netting work, together with the actions you've been taking today? >> congressman, I absolutely share your view that the treasury markets are critical, and we've got to make sure that we have efficiencies in our markets. And for too long, the sec and cftc regimes have not been compatible with one another.
▶ 0:32:53And so we've had broker dealers on the sec side and futures commission merchants on the cftc side that have different sets of customers, sometimes similar customers, but they've not been able to cross margin and net their, um, collateral across the regimes. And so we're working together with the sec to make sure that that's no longer the case.
▶ 0:33:10Yesterday, of course, we've put out some exemptive relief for the cme and ficc to make sure that their customers are able to cross margin, and we believe this will trickle down and benefit our everyday american consumers and market participants. As customers of these brokers, I think it's absolutely essential that we continue to work together. >> absolutely. The previous basel proposal would have significantly increased capital associated with banks clearing derivative products.
▶ 0:33:41Disincentivizing the already limited capacity for ag in users. We know clearing reduces systematic risk and that hedging in derivatives markets is helpful in helpful risk management tool. In your view, what are the benefits that clearing derivatives have in reducing systematic risk in derivatives markets? And how are you working with the bank regulators to make sure their final rules reflect that?
▶ 0:34:10>> one of the important reforms that came out of dodd-frank was focusing more of our derivatives markets into clearing. Um, and I think this has been very beneficial. We've had much more transparency and much less risk, much, much less counterparty risk. When you have a central counterparty clearing each trade. Um, so I think that's absolutely essential. We are getting more information as to the risk in our markets by coordinating with the clearinghouses at the agency and will continue to monitor that risk and surveil that risk.
▶ 0:34:36But it does create a much more, uh, well functioning system to have the central counterparty clearing each transaction. >> you mentioned previously that you're considering agriculture and energy exceptions from the swap dealer de minimis calculation. What liquidity benefits do you anticipate for commodity swaps markets with these changes? >> well, it's very important that we have well-functioning commodity derivatives markets for our participants.
▶ 0:35:04And part of that goes to, as we just mentioned, central clearing. It also goes to making sure that we have robust order books with deep liquidity. And so we're continuing to surveil the markets, making sure that these markets are liquid, that they're deep, that they've got investor protections to ensure that our market participants who are accessing these markets are able to get the best value for their for their money.
▶ 0:35:23And also making sure that there's, uh, not risk of these, uh, clearinghouses and exchanges, uh, damaging the, the books of our everyday americans who are using the markets. >> chairman congress created the cftc and the sec with separate and distinct missions. How are you ensuring jurisdictional lines of authority are not being blurred between cftc and the sec?
▶ 0:35:47I understand your interest in harmonization, but we must protect the market benefits of having bright lines of responsibility between the regulators. >> congressman, I absolutely agree. And the cftc and sec serve very different functions. The sec is a capital markets regulator. The cftc is a risk management regulator. And we've been really focused on the agricultural markets for so long. Whereas the sec has been more focused on wall street.
▶ 0:36:15And so it's very important that we keep these two agencies distinct, but it's important that they work well together and that they have the ability to harmonize the rule sets. We don't want to overly regulate to duplicative regulate our market participants, because that cost trickles down to the consumers that are using these markets. >> Mr. chairman, congress created the cftc to regulate our derivatives markets for ag commodity end users. I look forward to seeing you reorient the focus of the agency on serving our producers, and I encourage you to work closely with this committee.
▶ 0:36:44And secretary rollins. With that, I yield back. Mr. chairman. >> gentleman's time expired. Now, recognize the distinguished gentleman from georgia, also a chairman emeritus. Uh, Mr. scott, for five minutes. >> thank you. Chairman. Uh.
▶ 0:36:57And welcome, uh, chairman selig, good to have you here, but I would like to focus on how congress can help the cftc protect sensitive information in our markets from hackers and data breaches.
▶ 0:37:23And I spoke about this issue in the financial services committee on yesterday as it pertains to the sec.
▶ 0:37:36Now, the cftc and the sec have recently entered into a memorandum of understanding to better align regulations on emerging trading models.
▶ 0:37:53And I'm working on a bill to address that, uh, along with my colleague from, uh, and friend from cobb county, which we serve in together. Uh, so I want to ask you, Mr.
▶ 0:38:13Selig, could you clarify to members of this committee what this partnership will accomplish and why it is so important to the cftc? >> thank you. Congressman. For too long, the sec and cftc have failed to work well together.
▶ 0:38:41And this has been to the disadvantage of the american people. When our agencies are not able to share information and coordinate at the staff level, that means that things fall through the cracks. That also means that sometimes we might act in very different ways, and that's going to lead to inconsistent rules and regulations for the american people. It also is important for our surveillance system. We've got to make sure that we're comprehensively surveilling the markets. And so it's helpful to have an understanding of what's going on in the securities markets.
▶ 0:39:08While we're at the sec and the cftc, and for the sec also to have an understanding of what's happening in the commodities market. So under this memorandum of understanding, we've committed to work together on certain areas of shared regulatory interests and also for our staff to share information and coordinate on various matters. And this can include things like surveillance policy making as well as, uh, you know, just day to day, making sure the staff have the open lines of communication on all manner of issues. >> okay. Thank you.
▶ 0:39:38And I recently worked with my colleague from north carolina, Mr. rouzer, on induced introducing the cftc proprietary information act to safeguard sensitive information. So my second question to you is this, Mr.
▶ 0:40:02Seeley, can you tell us how the commission handles requests and shares sensitive information? Tell us how you do that, congressman. >> we adhere to all statutory requirements with respect to protecting sensitive information, whether it's pii or other types of sensitive information. We take that very seriously.
▶ 0:40:29And so we are complying, of course, with all requirements in our statute and our rules that we've promulgated, as well as any other federal standards. >> okay. And, uh, well, thank you for that.
▶ 0:40:42And are there any other authorities congress can provide to you, to the cftc that can help you and the commission better protect american sensitive information? And that's important. As I mentioned to you, I'm going to be working on this issue. I look forward to working with you.
▶ 0:41:10And, uh, and as I mentioned, I'm working on a bill with Mr. lauren boebert, my friend and colleague. And so we're going to be working with you. This is a tremendous problem. And our nation is losing a lot of money because of these hackers.
▶ 0:41:34And you two have got to work together and synthesize what we're doing. So I look forward to working with you on it. Thank you. And I yield back. Mr. chairman. >> the gentleman yields back now recognized just the other distinguished gentleman from georgia, the vice chair of the full committee, Mr. austin scott, for five minutes. >> thank you, chairman selig.
▶ 0:42:04Decentralized exchanges like hyper liquid are now listing perpetual contracts on crude oil. These products are functionally identical to what is traded on the chicago mercantile exchange and the intercontinental exchange, but they do not have segregated funds, market surveillance or us oversight. As a result, many market participants and hedgers are concerned about real world economics of these platforms.
▶ 0:42:31For example, surging volumes in oil contracts are potentially impacting the price of a gallon of gas for us drivers. And if my understanding is correct, as many as 200,000 orders per second occur on us. Hyper liquid and other decentralized exchanges, how should congress ensure these platforms meet the same standards as our regulated exchanges?
▶ 0:43:01And what is the risk if we do not? >> congressman, I appreciate you pointing out this distinction between our offshore and onshore markets. And, of course, the markets here in the united states are subject to comprehensive cftc regulation. We require these exchanges and clearinghouses to register with us and to abide by certain core principles that are set forth in our statute, and we surveil these markets on a regular basis.
▶ 0:43:26We are very much aware of some of these products trading offshore in markets that are not comprehensively supervised by us. And we, of course, are. Our goal is always going to be to onshore those markets and to have the markets subject to our regulation here in the united states and accessible to our us persons here in the us. But we are monitoring this.
▶ 0:43:46And of course, to the extent that there are products available that are taking liquidity out of the united states, we're going to make sure that we bring that back here into the united states under comprehensive regulation. >> well, I look forward to specific recommendations that you have that congress can do, um, to make sure that those markets have to meet the same standard. If, if the volume that I'm seeing is correct, uh, it has the potential to be detrimental to, uh, the united states consumer.
▶ 0:44:14Um, in your testimony, you said a priority of yours is to modernize the agency, keep pace with innovation. Uh, the markets overseen by the agency continue to evolve rapidly and including some of the technology that I just discussed. As we've discussed, innovations, innovation is in the commodity futures trading commission's mandate.
▶ 0:44:36I introduced the cftc research and development modernization act with congresswoman mcdonald rivet to give the agency it necessary tools to stay ahead of the curve. This particular piece of legislation expands in future proofs, the commission's mandate to explore new technologies, which we're seeing more trading on.
▶ 0:44:52Um encourages the agency to establish a research and development plan, provides new procurement authorities to facilitate that plan, and allows the cftc to work more closely with technology companies to understand what those technologies are developing and how those products will fit into or may fit into the agency's framework and the rules and regulations.
▶ 0:45:19Do you think updating and formalizing the commission's research mandate and tools make sense, and will this be helpful, and how will this help the agency? If you do? >> congressman, I appreciate your leadership on this issue, and I think it's absolutely essential that we future proof the agency that we modernize the agency for things to come. And that can include things like research and using new technologies, understanding those technologies.
▶ 0:45:44And we've taken clear leadership on that since I've joined the agency, making sure the staff are prepared for this new age of innovation. And so I support your efforts, and we look forward to working with your office on the legislation. >> thank you. I look forward to any specific suggestions that you have with any changes, uh, that you may need to the legislation to make it more effective. With that, Mr. chair, I yield the remainder. >> of my gentleman yield. >> yes, sir. >> thank you, Mr. chairman.
▶ 0:46:13Um, I, I appreciate your emphasis on your emphasis on efficiency. You know, kind of going back to previous discussions, I, I think that's important, especially, you know, uh, sounds like you're really trying to leverage, uh, ai and automation where appropriate, in order to bring, uh, gain green gain greater efficiency.
▶ 0:46:38Um, I also know that we're putting a lot on your plate with digital assets and, and we obviously going down this path with prediction markets, I don't know how that's going to wind up. Um, so I, I just want to make sure that, uh, you know, if you find yourself in the future in a situation where, um, you know, the need for additional qualified staff, uh, emerges, uh, that you will communicate that back to the committee. >> absolutely. >> I appreciate it.
▶ 0:47:07And I yield back. I now recognize the, uh. Uh, to the distinguished farmer from california, uh, Mr. costa, for five minutes. Thank you very much, Mr. chairman, ranking member, and, uh, my colleagues for this hearing. I think it's important and I think we need to continue this dialog. There's a lot to dig into. Uh, let me make an observation, chairman, and I thank you for being here.
▶ 0:47:34Uh, as I observed and I look back over the last 26 years of the commission and its make up and the membership and the requirement under the law that congress set that three members be of one party and, and the other two vacant seats be of the, of the, uh, other party. Um, I am at a loss to understand and I, I'm sure you follow the law and you have a level of integrity.
▶ 0:48:00Uh, but no one has determined that you're solomon, like, uh, nor king. And I think it's, uh, inappropriate to have one person as much as you'll try to be attentive to making these determinations when the law was very clearly intended to be, uh, a bipartisan representation. And that's my observation. And I hope we will address that at some point. But I want to talk about some other efforts that are new today.
▶ 0:48:30Um, we have the so-called event contracts. It's not just some new harmless financial product in my view. Uh, in too many cases, it's gambling by just another name, uh, betting on sports, on politics, on some cases, even on war, uh, instability and human suffering while companies, uh, try to hide behind the federal law and call it innovation. It's not innovation.
▶ 0:49:00It's a bet. This is serious problem. I think we have in states like I represent in california, where voters have already rejected, rejected, expanded online sports betting. It's serious problem for tribal governments. And we have 106 of them in california whose gaming rights and revenues depend upon carefully negotiated tribal state compacts. And it's a serious problem for credibility of your agency, your agency, commodity and futures trading commission.
▶ 0:49:29If an agency starts looking less like a market regulator and more like a body that's giving permission for these flat for these platforms and what they cover. I want to say this plainly, when I was here, when dodd-frank was passed, congress did not put public interest guardrails in a place where contracts involving gaming or death or assassination so that they could be later repackaged as a new line of business on a federally regulated exchange.
▶ 0:50:00That's my view. And, um, so I want to know where do you think this is going? Uh, chairman selig, uh, let me shift to what this means for states like california. Uh, tribal gaming does not exist in a vacuum. It operates under long negotiated tribal compacts tied directly to their sovereignty. Do you recognize these platforms offer sports or casino style gaming contracts undermine that sovereignty?
▶ 0:50:30>> congressman, we are taking our authority very seriously over prediction markets. As I laid out, the commodity exchange act has a very broad definition of the term commodity as well as. >> okay, on that point, then tell me what the commission is not under undercutting the tribes for these markets continue to exponentially grow because that's what's happening.
▶ 0:50:52>> congressman, as I was saying, we take this responsibility very seriously to regulate these markets, and we've come out with an advanced notice of proposed rulemaking that lists out virtually every question imaginable. >> I'd like you in a separate time to provide this committee how I I'm not doubting that you're taking it seriously, but congress intended sports wagering to be repackaged. I don't believe congress intended sports wagering to be repackaged as a financial project prod product to dodge rules that apply to everyone else, including our tribes.
▶ 0:51:22Uh, and, uh, for colleagues who are concerned about this, I'm working on legislation. I'd like to certainly encourage your participation if you're interested. Another aspect, I find it deeply troubling that event contracts try not just sports and politics, but to war. Reuters reported that six accounts made a combined 1.2 million profit from polymarket, bets that were placed in hours immediately before the february 28th strikes that killed the ayatollah khomeini.
▶ 0:51:51Uh, and kashi. There was a bet on whether, uh, ayatollah khomeini would be the out as the supreme leader reached more than $54.5 million in volume. I mean, this is nuts. Uh, you think this is what was intended? >> congressman, our statute has a very broad definition of the term commodity and a very broad definition of the term swap.
▶ 0:52:17We have put out an advanced notice of proposed rulemaking to solicit input as to how we should address these new markets. >> well, I don't find that a satisfactory answer. My time has expired, but let me just close on this note, Mr. chairman. Uh, I'll tell you, I don't believe this is market innovation. Uh, that is profiting from tragedy. And I think we need to get more invested in detailed with where this is all going. Thank you. The gentleman's time has expired.
▶ 0:52:46Now, recognize the gentleman from north carolina, Mr. rouzer, for five minutes. >> uh, thank you, Mr. chairman. Uh, chairman selig, great to have you here this morning. I'm over here. Uh, great to have you here this morning, and I appreciate your testimony very much. I want to touch on, uh, what my colleague, um, uh, Mr. scott from georgia, uh, former chairman of the committee, uh, mentioned as it related to, uh, protecting all sensitive data.
▶ 0:53:14Um, you know, the bill he and I were working on applies the same section eight disclosure protections to sensitive data, proprietary information, uh, to harmonize, uh, the commission's treatment of such data. Um, what's your, uh, what's your thoughts on the importance of section eight protection? And if you believe it's appropriate to expand the types of data covered, uh, given the expanding, uh, reporting requirements of the commission.
▶ 0:53:42>> congressman, I appreciate your leadership on this legislation. And I share your view that it's really important to be harmonized standards across agencies, in particular, when we have common registrants and common market participants. So I look forward to working with your office on this legislation, and would be very happy to continue the discussion. Uh, our staff, I believe, have already been providing some technical assistance and will continue to do so. >> and we appreciate that very much. Uh, moving on.
▶ 0:54:08Uh, your testimony is highlights on agriculture markets or your testimony highlights, uh, agriculture markets and how cftc can improve. Uh, you specifically mentioned working on timely publishing of reports and data. So the market has the best information possible. Uh, can you speak about your goals with the commitment of traders report and how it would help improve the market? >> absolutely. I think this is a really important issue to our agricultural community.
▶ 0:54:35I've met with many farmers, ranchers and producers who feel that they don't have access to the transparent information that they need. We, of course, are producing these reports and generating reports on a daily basis, but we only publish them on a weekly basis. And so we are evaluating whether to start pushing these out on a more frequent basis, and hope to update you on that very soon. But it's it's a top priority for us. >> very good.
▶ 0:55:00One other issue that's big in farm country, particularly right now, uh, the supply chain impacts in the middle east have cut global fertilizer supplies by a third and prices have skyrocketed as a result, according to a report released by the american farm bureau this past week, it says almost 80% of farmers in southern united states, uh, in the southern part of the united states, say they won't be able to afford all their needed supplies this year.
▶ 0:55:30Input cost, obviously are high all across the board. Uh, and only 19% of southern farmers pre-booked fertilizer purchases in advance of the planting season. So the question is this, uh, you know, as you look at global markets and how they operate with foreign traders possibly buying up our domestic supply and either reselling at a higher price or shipping it out of country. Uh, what's the cftc doing to ensure bad actors are not taking advantage of the market volatility there?
▶ 0:56:01>> well, as I said in my opening statement, we have a zero tolerance policy when it comes to manipulation, fraud or other abusive trading in our markets. And we will use the full force of the law against bad actors. We are also comprehensively surveilling these markets, and that's part of the reason we entered into this memorandum of understanding with the sec, so that we understand what's going on in the securities markets as well, and are comprehensively evaluating what's happening in our markets offshore as well as in related markets.
▶ 0:56:27So we are a cop on the beat, and we will continue to monitor and protect these markets to ensure that they're well functioning. >> thank you. >> um, we've seen shifts towards 24/7 trading models. And some participants particularly in agriculture, are concerned about this approach. Expanding to all contract types. Uh, has this been a topic that's come up in relation to the work you're doing with the agriculture advisory committee? And how are you looking at market questions like 24 over seven trading with ag stakeholders?
▶ 0:56:57>> we're meeting with agricultural stakeholders on a daily basis and getting input. We are also, as, uh, you mentioned, uh, we have an agricultural advisory committee, which I'm the sponsor of and, uh, have a senior agricultural advisor that is managing the committee. So we're getting a lot of input from that. We hope to soon come out with some, uh, more information about the topics and subject matters that are under consideration by the committee. We also, of course, will be hosting the ag con later this year. I believe the invites are the save.
▶ 0:57:26The date should go out tomorrow. So this is these are all topics that we plan to consider. 24 over seven is an important issue. Uh, I've said it before and I'll say it again that it's not one size fits all. So we need to be very careful as we're evaluating where 24 seven is appropriate and different products and markets. >> very good. >> thank you, Mr. chairman. My time has expired. >> the gentleman yields back. Now please recognize the gentleman from massachusetts. Thank you. And I want to thank you, Mr. chairman, for being here.
▶ 0:57:55And while I appreciate that you think this administration has done right by american farmers, let me tell you that our farmers are struggling like never before, in large part due to policies, uh, that this administration has championed. Uh, but I want to talk about the predictions markets. Um, as you know, um, I and others, including ranking member craig sent you a letter expressing our serious concerns about the possibility of insider trading. And I'll get to that in a moment.
▶ 0:58:22But I just want to ask a couple of basic questions here. Uh, Mr. chairman, would you say that the two biggest prediction markets, uh, kelsey and polymarket are competing, are competing with one another? I mean, they're competitors, right? >> I believe all market participants are in competition. >> so I take that as a yes. And as competitors in the same field. It would stand to reason then that they're trying to gain an advantage over one another. That's what competitors do, right?
▶ 0:58:49That's what. >> competition is. Yes. >> so, Mr. chairman, are you aware that president trump's son, donald trump jr, has been hired as an advisor for both caci and polymarket, two competing companies? >> congressman, I'm aware of this.
▶ 0:59:12>> uh, and would you say that it's accurate then that the trump family has a financial stake in how these prediction markets are regulated? >> congressman, I believe this hypothetical that you're trying to engage in is a. >> political exercise hypothetical. The president's son is, you know, um, you know, uh, involved with both of these companies. I mean, he makes a lot of money for it, but, uh, of course they have a financial interest.
▶ 0:59:40Um, and in all of this, I mean, the president's son is on the board of both multi-billion dollar prediction market companies. So it seems to me like the only reason two competing companies hired the same person is because they think he must be really, really, really valuable. I mean, and I wonder why they would think that, right? I mean, but Mr. seelig, has anybody in the white house ever asked or insinuated that you should drop the cto, cftc probe into polymarket?
▶ 1:00:12>> congressman, we treat all market participants alike. We do not pick winners and losers or engage in favoritism or bring politics into any of these matters. We take them very seriously, and I think it's insulting that you're insinuating that we would know. >> I'm worried because it smells like corruption. I'll be honest with you, mississippi, back to something you said about prediction markets and going after insider trading. You said in your testimony just now that anyone who engages in fraud, manipulation or insider trading in any of our markets will face the full force of the law. And just before 7 a.m.
▶ 1:00:41On monday, march 23rd, someone placed roughly $500 million in oil and equities future trades, betting that oil prices would plummet and the market would rally. And at 7:04 a.m. President donald trump posted. On truth social that the us had begun ceasefire talks.
▶ 1:01:04Now, whoever placed that bet knew what the president was about to post and made a lot of money off of that, made a lot of money off of that. Are you, uh, you know. Mrs. you and I both know that the odds of that bet is like 1 billion to 1. And I have one example after another of similar bets. There was no public information about ceasefire talks.
▶ 1:01:29These are decisions that are made, um, in the white house at the highest levels, decisions that that very, very, very few people know about until the president posts them. So yes or no. Mr. do you do you think the president's top staff would have that knowledge about a cease fire? >> congressman, as I said in my opening statement, we have a zero tolerance policy when it comes to fraud, abuse of trading practices and manipulation, and anyone who engages in that behavior will face the full force of the law.
▶ 1:01:59>> do you think the president's family would have knowledge of, uh, of that? Uh, like what about donald trump jr? Do you think he would have known that maybe a, an announcement of a cease fire was coming? >> congressman, I'm not going to play speculation games with you, but I will tell you that we have a zero tolerance policy when it comes to fraud manipulation and insider trading. And we will bring actions against. >> yes or no.
▶ 1:02:20Are you aware of public reporting that the net worth of the trump family meeting president trump and his immediate family members has gone up by $1.4 billion since he took office a little over a year ago, because it has, uh, and I believe that this president is using public power for private profit. And I think he and his family are lining their pockets with insider information. And I think donald trump junior is trading his access for money.
▶ 1:02:47And I think it's the definition of corruption. And I think that your actions to deregulate this market are helping them do it. And I think it is wrong. I think it is wrong. And I think it's something that this committee needs to pay much more attention to. With that, I yield back. My time. >> has expired. Now, recognize the gentleman from nebraska. >> thank you, Mr. chairman. And also thank you, Mr. chairman, for being here. I would like to follow up on some of the questions that Mr. mcgovern asked.
▶ 1:03:15There are a number of stories circulating describing patterns of insider trading that the office that the author has claimed to be obvious trading. So my first question is, can publicly available trading data disclose individual traders, their individual positions or the intentions behind individual trades? >> well, congressman, we have a number of different, um, venues for transparency in our markets.
▶ 1:03:40Of course, the exchanges themselves have order books that we are monitoring as the cftc as a regulator of these markets. We also have swap data reporting. So a lot of the swaps markets that are over the counter in the wake of the financial crisis, we had dodd-frank, which has brought transparency to those markets. So of course, the public has a line of sight into what's happening over the counter as well as on the exchanges. And the cftc is the real line of defense and monitoring all of that. >> okay, a follow up.
▶ 1:04:06Second, does the commission either directly or with applicable self-regulatory organizations, examine reports of of insider trading in the markets regulated by the commission. >> as as a self-regulatory organizations, the exchanges have the ability to surveil and police and monitor their markets. They of course, have rulebooks that expressly prohibit things like insider trading, market manipulation and abusive trading practices.
▶ 1:04:33And some of the exchanges have brought recently actually actions both in the prediction space as well as in other contexts in our more traditional markets. And so that's something exchanges are doing on a regular basis. We're examining and overseeing those programs as the regulator of these sros, and will continue to do so. >> our third has the commission examine the facts behind some of the recent high profile accusations of insider trading in oil and s&p 500 futures.
▶ 1:05:01>> as I said in my opening statement, we have a zero tolerance policy when it comes to fraud, insider trading and manipulation. Our markets, and we're actively policing and surveilling these markets. I can't speak to any particular investigation, the existence of an investigation or not, because, of course, that would hinder the investigation itself. But we are a cop on the beat and will continue to be. >> I also have a follow up with Mr. costa's question.
▶ 1:05:24I've seen some of the uncomfortable stories related to prediction markets in recent months, including the markets on maduro's ouster and the war in iran. Markets settle just by word spoken on earnings calls and a story about a journalist being threatened over his reporting. My question to you is, do you need more authorities or how can we assist in this area? >> we have a wealth of authority under the commodity exchange act. As I mentioned previously, the definition of commodity is very broad. The definition of swaps very broad, are extraterritorial authority.
▶ 1:05:55To the extent things are happening offshore is fairly broad. There are areas where it could be expanded. Under dodd-frank. We have much greater extraterritorial authority when it comes to the swaps markets, but the futures contracts markets less so. And so that's certainly something we'd be willing to consider and work with your office on expanding. >> if we could take some of your council advice on how we can provide the better and more defined authorities for you, we'd be glad to support and work with you. With that, Mr.
▶ 1:06:25Chairman, I yield. >> gentleman yields back. Now, please recognize the distinguished lady, doctor adams from north carolina. >> thank you, Mr. chairman, and thank you, Mr. selig, for being here. Um, I want to follow up on, um, the ranking member's question. And also Mr.
▶ 1:06:42Costa made reference to this, um, in terms of the, uh, the, the new regulations and you being the only sitting, uh, commissioner, did you say that you would move ahead, move forward with, uh, making new major new regulations? Did I understand you say that. >> congressman woman, I believe I need to do that as chairman of the agency.
▶ 1:07:09It's absolutely essential that the american people have the investor protections that they deserve. And so we will continue to evaluate the need for new rules and move forward with those rulemakings as appropriate. >> so as one person and other commissioners are not there, you think you. Okay, okay, let me let me move on.
▶ 1:07:26Um, your testimony, uh, says that that your staff has been rightsized, uh, cumbersome rules so that even small producers, farmers can properly manage risk, but we haven't seen any proposed rule changes announced by the commission. Uh, just the anpr on on prediction markets. So can you explain what rules you have changed that directly impact farmers and how was this done without notice and comment?
▶ 1:07:57>> congresswoman, we're working on rules that will help protect our farmers, ranchers and producers. One of the biggest issues that we're addressing has been the the lack of the ability to access the markets. So some of the futures commission merchants, which are the brokers that these farmers, ranchers and producers are using to get to the exchanges, they've been really heavily regulated. We've seen the massive overregulation of the real world economy through dodd-frank regulations over the years.
▶ 1:08:24So we're taking a hard look at those, and we do look forward to coming out with some new proposals that we believe will help roll that back. We are also looking at the swap dealer de minimis threshold. As I mentioned in my opening statement, there are many of these dealers out there who are reticent to transact with the smallest producers, whether it's an energy, agriculture or critical minerals. And so we're hoping to take a look at what sorts of swaps get calculated into the swap dealer registration threshold to help. >> thank you.
▶ 1:08:54Let me let me move on. So the financial times reported that us broker robinhood has excluded some prediction markets and some contracts from their customers over concerns they encourage manipulation and insider trading. They're particularly worried about so-called mention contracts, where wagers are made on words that will be used at certain speeches or events.
▶ 1:09:20These are contracts that can be found on us registered exchanges. So if robinhood recognizes these contracts as susceptible to manipulation and trading, why doesn't cftc? >> congresswoman, we've come out with an advanced notice of proposed rulemaking on this subject. So I don't want to prejudge any of those issues. But we've laid out and I believe we've submitted it for the record, a list of questions related to this subject as well as many others.
▶ 1:09:48And so we're hoping to get stakeholder input from robinhood, as well as anyone else that wants to comment on this issue. >> okay. So, uh, do you believe that these mentioned contracts, for example, like what former congressman george santos said on newsmax, on newsmax interview, do you believe that they are not susceptible to manipulation? >> well, congresswoman, I'm not going to prejudge these questions.
▶ 1:10:13As I mentioned, of course, the exchanges are the first line in determining whether a contract is readily susceptible to manipulation. And it's very serious matter to self certify that and to certify to the commission that that is the case. We evaluate that and we will continue to do so. But it's really important that we get the input from the community on these issues through our rule making process. >> so let me let me ask about this enforcement report.
▶ 1:10:38Uh, typically the cftc publishes this enforcement report during the quarter. At the end of the fiscal year, october 1st through december 31st, it's six months and a half, um, past that since, uh, fiscal year 25 has ended and the cftc still has not published its 2025 enforcement report, which would primarily cover the period of your predecessor.
▶ 1:11:04So is it your decision to withhold publication of this report? If so, why? And if not, whose decision is it? >> congresswoman, I've been in the seat for just over 100 days now. And so, of course, we've revitalized our enforcement program. We take this very seriously. As I said in my opening statement, we have a zero tolerance policy when it comes to fraud, manipulation and abuse, and we will continue to take action to make sure that our enforcement program is strong.
▶ 1:11:35>> thank you, Mr. chairman, I yield back. >> gentleman yields back. Now recognize the favorite son of south dakota, Mr. johnson for five. >> minutes, sir. And thanks for being here. I was glad chairman thompson hit a little bit on clarity, uh, which, as you know, would clearly and further establish the cftc's role as the primary regulator of digital commodities. Uh, to me, this just makes sense given the fact that you're a principles based regulatory framework agency.
▶ 1:12:02That's a much better fit, I think, than the, than the sec, as your team has reviewed clarity. Sir, do you feel like it? Uh, it gives you the legal authorities and the tools you'd need on the spot market side. >> well, congressman, I applaud your leadership on digital asset issues and this committee for, uh, working to advance bipartisan crypto market structure legislation.
▶ 1:12:24I believe that the legislation is really critical to allow for exchanges, brokers and custodians to register with the cftc. I think this is an important endeavor. We've seen for too long this patchwork of state licensing regimes, whether it's virtual currency licensing or money transmitter licensing.
▶ 1:12:44And I believe that the work of this committee, as well as the work ongoing in the senate ag committee, have really put forward a comprehensive and very well thought out, uh, registration regime with the cftc. I believe the bills are very similar. And so I'm looking forward to seeing these, uh, on the president's desk very soon. >> so obviously, if the clarity act gets passed a law, which it should, uh, it's a strong bipartisan work product.
▶ 1:13:06I mean, your agency is going to be, you know, given some additional tasks, uh, particularly on the spot market side. Uh, do you have comfort, sir, that the legislation is currently drafted gives you all the tools and the authority you need to do that appropriately. >> congressman, I do believe that everything I've seen to date.
▶ 1:13:27Of course, we don't have the the final version on the senate side, but everything that I've seen so far has been excellent and really provides the agency with the authority it needs to comprehensively regulate these markets to have registration of new market participants and make sure that we're, uh, really a future forward regulator for this new asset class. >> of course, too often it's the case that congress doesn't act until there's some urgency. Uh, I mean, talk to the committee a little bit, a little bit.
▶ 1:13:56Is there any particular urgency in the marketplace? I mean, are there are there particular reasons why congress should act to pass the clarity act or some other, you know, market, uh, you know, market regulating bill in the, in the short term, I mean, or should we just shrug our shoulders and say, we could get this done in 5 or 10 years? >> well, we saw with the implosion of ftx that the cftc regulated ftx platform protected customer funds.
▶ 1:14:27Whereas these offshore platforms platforms are subject to different regulatory treatment. Uh, really did not have the safeguards to protect american customers. And so I think it's absolutely critical. Every day we delay, as is putting american investors and consumers at risk. And I am concerned that if we don't get this done now, we won't have adequate time to to get the rules in place. And so that also extends the risk to investors and consumers in these markets. And so I really applaud the efforts.
▶ 1:14:54And I do believe there's a sense of urgency because it's absolutely vital that we have clarity, certainty and investor protections for these markets. >> yeah. Mr. chairman, I think that's exceptionally well said. I mean, if we care about consumer protection and we need to if we care about innovation and we need to, uh, if we care about a fully functioning marketplace and we need to, uh, passing the clarity act, uh, is really, really important. Lots going on, uh, in your world.
▶ 1:15:18I just want to touch base and see how the conversations are going with your agricultural advisory committee as they look at all of the things going on at the commission that are maybe not related to the ag portfolio of your authority. Does the committee feel good about where where your works at on the agricultural side? >> absolutely. So we have revitalized the agricultural advisory committee. It's got a great team.
▶ 1:15:46Um, we've just announced the whole roster and we're looking forward to having the meeting, uh, open meeting very soon, uh, with the full slate. And so the critical issues, I've discussed some of them today, but of course, the cot reporting 24 over seven trading, all of that will feature prominently, I think, in these discussions. And I'm looking forward to continued discussions with the agricultural community and other venues as well. We've announced our ag con that will be held later this year. And so it's not just limited to the ag advisory committee.
▶ 1:16:16I encourage anyone that's interested in these issues to engage with us as much as they'd like. >> thanks so much. With that, chairman thompson, I would yield back. >> gentleman yields back. Now recognize the gentlelady from oregon, miss salinas for five minutes. >> thank you, chair thompson for holding today's hearing and ranking member craig. And thank you to chairman celik for being with us today.
▶ 1:16:36In his speech on march 31st, that you enclosed with your two page testimony, director of enforcement david miller outlined the division of enforcement's five enforcement priorities and stated that cftc will hire additional staff to help address these priorities. And you've been repeating that here today. However, since fy 24, the cftc budget for the division of enforcement has shrunk significantly and the fy 27 budget only requests three additional staff.
▶ 1:17:01Well, three additional staff members be able to adequately, adequately address these five priorities, specifically insider trading and fraud in the predictions markets. And how specifically do you use ai with human interaction and intervention oversight to address this? >> congressman, as I said in my opening statement, we take enforcement absolutely critically, seriously. This is a top priority of mine.
▶ 1:17:25As chairman, I cannot have threats to our markets such as insider trading, manipulation and fraud, undermining the real important policy work that we're doing here, the real important investment protections that we're putting in place. So david miller has been staffing up within the division of enforcement. And I the number that you cite, the three persons, I believe is possibly, uh, not exactly correct. We certainly will continue to expand.
▶ 1:17:54We have a number of job postings currently on usa jobs, and we'll continue to post as needed. Uh, of course, tools such as ai are going to be very helpful in surveilling and bringing investigations. And we're incorporating that into various workflows. So we are a cop on the beat and we're absolutely taking this mission critical, uh, function seriously. >> thank you. How many investigations related to prediction markets are currently ongoing? >> congressman, we have numerous investigations ongoing.
▶ 1:18:24I can't speak to the specific number and the specifics of those investigations, as that is something that's nonpublic. It it would hinder the investigations themselves. >> and in the aggregate, how many investigations are ongoing? You can't give us that number, congressman. >> we receive hundreds of tips that prompt investigations. So there's many, many, uh, whether it's in the hundreds or thousands investigations ongoing, I can't speak to the specific number. Um, but of course, we're always receiving tips and always responding and making sure that we're protecting our markets.
▶ 1:18:55>> okay. Those hundreds to thousands of investigations. How long do the investigations typically take. >> congresswoman? The investigations can take varying lengths. It really depends on the nature of the investigation. We are not going to rush these investigations. And oftentimes they require coordination with law enforcement and other agencies. Uh, but investigations take varying lengths. Sometimes it can take up to a year, multiple years before we charge or file any sort of complaint. >> okay. Thank you.
▶ 1:19:21Um, has the commission considered whether additional safeguards such as geofencing might be appropriate in certain contexts, including with respect to activity occurring on tribal lands? And if so, what factors would inform that kind of rulemaking? >> congressman, uh, we've come out with a an advanced notice of proposed rulemaking when it comes to prediction markets. So we are soliciting comments as to any changes to our rules with respect to these products. We, of course, are taking input from members of the tribal community.
▶ 1:19:51I've met with several of the tribes, uh, and will continue to meet with the tribes, uh, going forward. So that's certainly an issue that we'll consider and we'll be happy to, to work with your office if it's something of importance to you. >> thank you. I would like to work with you on that. Um, can you explain how the lack of geo fencing might interact with the indian gaming regulatory act? >> congresswoman, uh, this again is a matter that I don't want to prejudge. It is something that can be addressed in our rulemaking. So we've asked for public comment on these questions.
▶ 1:20:22>> thank you. Um, one final question. I'm co-chair of the mental health caucus with, um, one of my colleagues, Mr. bacon, as well. There's growing attention around behavioral health risks in both financial trading and gambling. How does the commission think about mitigating risks of excessive or compulsive participation in prediction markets? And is this something that you track?
▶ 1:20:42>> well, congresswoman, this is something that is deeply concerning to the extent that there's addiction or other harms coming from the use of our financial markets, we take that very seriously and are here to to assist, whether it's through legislation or otherwise. With these efforts, we also have market participants such as brokers and exchanges that have responsibilities to their customers to disclose and educate on the various risks in using the market.
▶ 1:21:09So we'll continue to work with our exchanges and our brokers to make sure that they're providing that information and disclosure to their market participants. >> thank you again for being here, I yield back. >> gentlelady yields back. Now recognize the gentleman from kansas, Mr. mann, for five minutes. >> great. Thank you, Mr. chairman. And thank you for being here. Um, to testify, I represent the big first district of kansas, which is 60 primarily rural counties in western and central kansas.
▶ 1:21:37The cftc plays a critical role in our economy, ensuring that our markets for producers function as they should. For farmers, ranchers, and ag producers in my district, these markets are essential risk management tools to allow them to hedge a ton of uncertainty in agriculture and secure prices, which is always the case. Um, appreciate cftc oversight on these and very important risk management tools.
▶ 1:22:01It was mentioned before, but to reiterate and as you know, well aware, the agency's gone more than 15 years without full reauthorization. Even as the markets that you regulate and the challenges facing agriculture have grown more and more complex by the day, much less the last 15 years. So I think we all agree it's way past time that we're reauthorized, um, cftc and make sure that we have transparent, fair and well functioning markets. Just a few questions for you, chairman. And again, thank you for being here today.
▶ 1:22:33In your written testimony, you mentioned that your agency is rebuilding the agriculture advisory committee. I know, I think just last friday, you, um, you know, released the members of that committee. And I know you also have mentioned that you're reintroducing aggiecon in conjunction with k-state, which is in my district. Um, I commend and appreciate that effort. Can you speak to some of the priorities that you have and what you really hope to get from this agriculture advisory committee?
▶ 1:23:00>> thank you, congressman, and I enjoyed the opportunity to hear you speak at the commodity markets council conference several months ago. Uh, the agricultural advisory committee and our aggiecon efforts are really critical. We've got to make sure that our farmers, ranchers and producers have a seat at the table.
▶ 1:23:15And there's so many issues that they're interested in, whether it's 24/7 trading, the use of perpetuals and new types of products in our markets, as well as the the really overregulation of the real world economy through the regulation of our brokers and swap dealers. So we're considering all of that. We hope to have a real, uh, open and transparent dialog with the market participants at the advisory committee as well as the agricultural convention. And of course, I'm meeting with these folks on a regular basis in my day to day job.
▶ 1:23:46>> and what have you been hearing from the folks representing agriculture? What have been the kind of the themes or the main things that you've been hearing so far? >> well, they're both excited about the new technologies and changes in our markets, but they do have some concern about things like 24, seven. Um, reporting is an important issue. So the reporting of the, uh, trading on call reports, they want to make sure that that is transparent.
▶ 1:24:11They've been concerned that some participants have access this information from proprietary tools that they don't get. And so they want that reported so they understand what's going on in the markets. Um, we're also seeing interest and concern around new types of derivative instruments, whether it's prediction markets or perpetuals. And so we're certainly listening to all these voices and making sure that we're addressing these concerns. >> I'm glad that you mentioned the 24 seven model.
▶ 1:24:36I had stopped all over the district the last couple of weeks, met with a cattle feeder and garden city, kansas, which is in southwest kansas. You know, these are very sophisticated ag producers, you know, that are trying to hedge tens of millions of dollars of risk on very thin margins, so they cannot afford to make errors.
▶ 1:24:55Um, he mentioned to me this concern about 24 seven marc veasey what thoughts do you have, um, on that and what ought we be doing, uh, in your view, so far as helping our ag producers with this 24 seven model? >> well, 24 seven is not one size fits all. So we have to look at each product, each market and consider whether it makes sense for, for that product market.
▶ 1:25:18And as I mentioned, many of the farmers, ranchers and producers are concerned that they're going to have to trade on a 24 seven basis, monitor the markets all night. And that also means 24 seven risk management. So these are all considerations and concerns that we're taking in. We've actually come out, uh, I believe under chairman pham previously, uh, in soliciting input on these issues. And we'll consider the, uh, all of those comments.
▶ 1:25:46Uh, but it's definitely something that we're on top of and making sure we don't roll out all over the place. Uh, it may work for crypto, but not for other things. >> I really appreciate you saying that. I think it's important to acknowledge that if we get this wrong in 24 seven, you know, has the impact to or the potential to really impact our food supply because you could have some very sophisticated large ag producers, small producers that matter.
▶ 1:26:09They go out of business because they're on the wrong side of a market move, because it happens at 330 in the morning, because of something going on on the other side of the world, right? So I think we have to understand and acknowledge the complexities of these markets and the importance of getting it right for ag producers. So thank you for being here. Uh, Mr. chairman, I yield back the six five seconds that I have. >> gentleman. Gentleman yields back. Now recognize the gentleman from north carolina, Mr. davis. >> um, thank you so much, Mr. chair.
▶ 1:26:35And to the ranking member for having today's meeting and all the work of the committee, um, regarding the cftc. And to the chair, thank you so much for being here today. I've taken tremendous interest in the cftc, and I want to jump in here. The recent sec. Cftc memorandum of understanding, which represents a significant step towards reducing fragmentation, improving coordination among our financial regulators, regular regulators.
▶ 1:27:05From your perspective, Mr. chair, what are the most meaningful ways this agreement will improve regulatory clarity and consistency for market participants, particularly in areas like digital assets where jurisdiction has historically been less clear. >> thank you for that question, congressman. This is a really important issue. If you look at digital assets, as you suggest, blockchain networks span all sorts of products.
▶ 1:27:34We've seen digital securities, digital commodities, collectibles and all sorts of things put on a blockchain. And if we have different rules and requirements on the security side, from the commodity side, that can create market issues, and that can also result in essentially having to use different blockchains and different types of technologies on each side. We want things built in a way that works for both securities and commodities. And of course, there are differences in the way we regulate and our requirements.
▶ 1:28:04So having the open line of communication, having the ability to share ideas and work together to make sure we get it right on both sides in a way that really fits comprehensively and works well together, is important to the american people. And so chairman atkins and I are committed to working together. And this memorandum of understanding really solidifies our vision for comprehensively regulated, well-regulated markets. >> okay. Thank you.
▶ 1:28:28In your remarks at the dc blockchain summit, um, you spoke about a shift towards trust and decentralization where market confidence can increasingly come from transparent systems and verifiable code.
▶ 1:28:44Um, as the cftc evaluates digital assets, asset markets, how do you think about translating that concept into regulatory framework that still ensures accountability, market integrity, and customer protection?
▶ 1:29:04>> well, for too long, our software developers, our builders, our innovators have been living in this world of uncertainty where they're trying to build software systems that oftentimes achieve the goals of our regulations, but they might do it in a way that's slightly different from the way our rules and regulations are set up, the way that they require things to run. And so we need to create a future proof, flexible regulatory scheme that allows for these software systems to function.
▶ 1:29:33Um, oftentimes automation really works better than regulation because you know that the code is designed to achieve the aim and it functions as designed as opposed to regulation where we have to look over each participant, make sure that they're following the rules. So we don't want to discourage software systems that are autonomous and function on chain in a way that achieves our regulatory aims. We need to accommodate that and allow for it.
▶ 1:30:00So we're working closely, as I mentioned, with the sec and also with the market participants to understand what they're building and make sure we have the space here in the united states for them to do it. >> um, well, I want to make clear I don't come up here to focus on throwing attacks at anybody. The other side. Um, but I do believe that this is a very, um, for me, I think an important conversation that we should be able to have in a meaningful way.
▶ 1:30:27Um, you're currently the only commissioner at the cftc. Um, leaving, uh, for commissioner seats vacant. And I realize, you know, the president has a role in this. And again, it's not aimed here at an attack.
▶ 1:30:45But my question just for perspective and background is what do you see as the impact, um, the lack of having other commissioners, um, that's on board, you know, working, uh, during this critical time. Um, because right now the role of the cftc is vastly changing.
▶ 1:31:14>> what I believe is critically important is that we get a wide range of input on our work. And what I've committed to do and as I've, uh, put forward an advanced rulemaking already, uh, is that we're going to do more through rulemaking. We can't have, uh, the staff deciding on discretion what the rules are. So we're putting that out for public input that allows for a wide range of comment from all stakeholders. And we will consider those comments for statutorily required to do so. >> thanks, Mr. gilbert.
▶ 1:31:46>> gentleman's time has expired. Uh, now recognize the gentleman from indiana, Mr. messmer, for five minutes. >> uh, thank you chairman. And thank you, chairman, for being here today. Uh, last november, representative mclean delaney and I introduced the cftc charitable organization exemption act. Uh, many churches provide retirement medical benefits to their employees through something called a church plan.
▶ 1:32:07And while small church may not be able to provide robust benefits for its staff, church plans allow multiple churches to pool their resources and improve how they can serve their employees. Unfortunately, the commodity exchange act does not account for church plans, so the commission regulates them as a commodity pool operator or a commodity trading advisor. Uh chairman selig, the commission has laid out robust disclosure reporting requirements for cpas and ctas.
▶ 1:32:33While prudent for these market actors, would you agree that the same regulations might be burdensome for a church plan? >> congressman, I appreciate your leadership on this issue. And I do believe that some of our rules and regulations really are ill fit for market participants and for different purposes. And church plans is one great example of where you might have a group pulling together funds to, to manage risk or to, uh, you know, create an investment position.
▶ 1:33:00And the rules and regulations are really designed for very sophisticated large institutions. So it's certainly something that I'd be very happy to work with your office on. I believe we're already providing to on this bill. >> okay. Uh, would you commit to partnering with me as congress works for a legislative solution for church plans? >> congressman, I'm very happy to work with your office on this legislation. >> thank you. Uh, now I want to pick your brain about another, uh, another one of cftc's legal priorities.
▶ 1:33:24As you know, in the 2019 cftc reauthorization bill, which passed out of this committee with broad bipartisan support, included a provision related to privilege retention that could you explain what privilege privilege retention is and why it's an important protection for the cftc? >> well, congressman, as we are working with various matters, we engage in certain communications. And oftentimes those communications are protected by privilege, such as attorney client privilege, work product privilege or deliberative privilege.
▶ 1:33:54And this privilege protects that information from being disclosed. But there are instances where we're disclosing this information, for example, to another agency or to congress, and that could jeopardize the privilege. >> okay. Thank you. How would the benefits of privilege, privilege, retention, protection translate to the cftc registrants or individual consumers? >> well, congressman, I do believe it's very important that we protect privilege when it comes to our communications.
▶ 1:34:20But sometimes, as I mentioned, we do have to share certain information with congress or with other agencies, and we don't want to jeopardize the ability to protect that information. Some of this information is very sensitive. Uh, and if it were disclosed, could put individuals at risk. So we are very supportive of protections for our privilege. >> thank you. Yield back the remainder of my time. >> gentleman yields back. Um votes will be called momentarily, but my intention is to at least get through at least two more members.
▶ 1:34:50And then we'll reconvene, uh, five minutes after the last vote is called. Uh, but we're going to keep going and recognize miss basinski of illinois for five minutes. >> thank you chairman. Um, and thank you for being here, chairman selig. Um, I also want to thank my ranking member too. I don't want to miss that opportunity. Um, but thank you, chairman selig, for being here. I do appreciate that.
▶ 1:35:13Um, right now the commodity futures trading commission is really in the spotlight because of the role it plays in new and emerging markets, especially prediction markets. Um, at their core, prediction markets can look pretty harmless. People at trading. Uh, people are trading on questions such as, you know, what song will be number one, who the next james bond will be. Um, but that's not really where it stops is on these kind of more lighter questions.
▶ 1:35:42Obviously, these markets are also being used to trade on real world events, government decisions, geopolitical conflicts, and even military action. And that is where prediction markets start to raise some really serious concerns for me. Earlier this year, an article crossed my desk that, um, that made this risk very real.
▶ 1:36:01And I point this out hours before the united states carried out airstrikes on iran, a group of newly created accounts on polymarket placed significant bets that those strikes would happen. Six wallets funded within 24 hours of these strikes. Bet, yes, that they would happen. And when the strikes would happen. And then they ended up these six wallets, those folks that, um, had them walked away with about $1.2 million in profit.
▶ 1:36:29That looks someone that perhaps might have knew some inside information, in my opinion, or at the very least was trading like they did. And it is not just a one off event. We are seeing repeated patterns of well timed, highly profitable bets tied to sensitive global events that should concern every single one of us. I think in congress, I think the question is pretty simple how did they know that information?
▶ 1:36:59And that's why I introduced a bipartisan bill called the predict act to make sure senior government officials, including members of congress, senior staff and executive and judiciary branch officials, cannot participate in prediction markets using nonpublic information that they gained through the jobs that they have.
▶ 1:37:18This bill is straightforward if you are entrusted with sensitive information, you cannot turn around and profit off of it because there is a clear difference between making an educated guess on what can happen and insider trading. Public servants should not be profiting off of privileged information that is entrusted to them by the american people. If we do not draw a clear line here, we are leaving the door wide open to corruption.
▶ 1:37:42So, chairman selig, I want to thank you again for being here to talk with us about this important topic, and I do look forward to working with you. Um, to stop any prediction, any I'm sorry to stop any insider trading in the prediction markets. My first question is on the predict act. Do you have any thoughts or feedback on what additional steps you would recommend to rooting out insider trading and protecting the integrity of the prediction markets?
▶ 1:38:13>> congressman, thank you very much for your leadership on this issue. I think it's vitally important that we protect our markets from insider trading, fraud, manipulation and abuse. And as I said in my opening statement, we have a zero tolerance policy when it comes to any of this activity in our markets. I believe that it's in our statute currently to to, of course, police these things, but we can always use additional authorities. And so we'd be happy to work with your office on how to build that out further.
▶ 1:38:42Um, in our statute, the insider trading authority is based on our anti-fraud and anti manipulation authority. And so it's quite broad, but there are always areas where we can expand that particular. Some of the contracts you reference are offshore. I mentioned our authority when it comes to policing fraud. Manipulation is different when it comes to swaps versus futures. So that that might be an area where we can work together. >> that would be great. I look forward to that.
▶ 1:39:09Um, um, the cftc, cftc is responsible for overseeing the markets that our farmers, producers and cooperatives rely on every single day to manage real risk. As you know, at the same time, the commission's responsibilities are rapidly expanding into digital assets, into prediction markets, and into increasingly complex and fast moving financial profits. I products. I know this has been covered by some of my other colleagues, but I share their concern about the lack of staffing at the cftc.
▶ 1:39:36And I want to specifically highlight, you know, you're an independent agency, just like the consumer product safety commission is an independent agency. There's a lawsuit that's a legal action that is escalating to the supreme court on the fact that they, too, like the cftc, don't have their commissioner spots filled. They too, only have one person serving on that commission.
▶ 1:40:00And my question is just with two three seconds remaining, how challenging is that to not have other colleagues, other commissioners, when you're taking on more and more responsibility there at the cftc? >> well, as I mentioned, the way that we're addressing this is by making sure that we go through the administrative procedure act rule making process, and we take a wide range of industry comment, and we will continue to do so on major policy changes. >> okay, I yield back. >> gentleman, time has expired.
▶ 1:40:28Now recognize the gentleman from north carolina, Mr. harris, for five minutes. >> thank you, Mr. chairman. And thank you, chairman selig, for being with us today. Mr. chairman, I was concerned to learn that the only approved medals depositories used for deliveries on gold and silver futures contracts are heavily concentrated in the single geographic region around new york city.
▶ 1:40:51And this level of geographic concentration is troubling to me from a point of national security, market efficiency and operational resiliency standpoint, which is why I've chosen to be an original co-sponsor of the silver act that seeks to correct this issue.
▶ 1:41:08After all, we've seen firsthand, whether through terrorist attacks like nine over 11, extreme weather events like hurricane sandy, the new york region is not immune to disruption, and so concentrating critical financial infrastructure in a single region like new york does tend to create potential risk and vulnerabilities that we just wouldn't accept in other sectors, especially one that is so crucial to our financial system.
▶ 1:41:33So with that, uh, in our national security, this is why I believe geographic diversity is an important component of operational resilience and risk management. Mr. chairman, let me ask you, while it made sense 100 years ago for these depositories to be located in the greater new york area, why in our modern age are they still centralized in a single location where they are susceptible to these kind of events, terrorist attacks and foreign threats that I just mentioned?
▶ 1:42:05>> well, congressman, as a regulator of our commodity derivatives markets, it's absolutely critical that we have deliverable supply available as it's, uh, possible to take our futures contracts to delivery. And to the extent there's concentration risk, that's certainly something that we'd evaluate as a regulator and ensuring that our contracts have integrity and that our markets are well functioning. So we applaud your leadership on this issue, and we'd be happy to work with your office on it. >> super.
▶ 1:42:30So are you willing to study whether the current concentration of precious metals depositories in a single geographic area does pose a systemic risk to market stability, and our national security? >> well, congressman, we certainly work together with your office to to better understand the risks posed by these, um, this concentration. >> super well, these markets really were designed to help participants manage and mitigate risk.
▶ 1:42:55So it stands to reason that we should also ensure the market structure itself is resilient and capable of mitigating its own risk real quickly. And before we break for for votes, um, my colleague Mr. mark messmer brought up the issue and I've been a pastor for 37 years, so I'm well aware of the fact that churches often operate with a limited administrative and financial resources. He mentioned the problem and you addressed the issue. I want to go a little bit further.
▶ 1:43:23In 2014, the cftc issued a no action letter offering relief for church pension plans, and in 2017, a no action letter offering relief for university endowments endowments. These policies have remained in place since they were issued across multiple administrations. However, we know these letters can be revoked at any time.
▶ 1:43:42As chairman, are you committed to continuing the precedent set by previous leadership, cftc leadership and maintaining these no action policies to protect our churches and nonprofits? To not be treated as wall street actors. >> and, congressman, I'm glad you raised this.
▶ 1:44:00I think it's critical that we actually take a lot of these no action letters and codify them and rules so that they have longevity, because there is always this risk that a future chairman or future commissioner will come along and pull those letters. So we'll certainly continue to keep that in place. But we'd like to work on trying to finalize and codify these as rules. >> I agree with you 100%. We do want to codify it, but just wanted to know that you were on the on the same page here in moving forward. And with that, Mr. chairman, I yield back. Okay.
▶ 1:44:33>> I appreciate the gentleman yields back. I've been informed that the votes have been called, but recognize Mr. vazquez and I. When he's done, we will recess the committee and I. I think anyone who stays will have adequate time to get to the floor for the vote. So the gentleman from mexico is recognized. >> thank you, Mr. chairman, and welcome, chairman selig. Um, chairman. Behind me are two separate betting lines for a baseball game that took place earlier this week.
▶ 1:44:59So I'd like to ask you, can you identify which betting line is from a regulated major sports book and which one is from an event contract, from a prediction market? >> congressman, I'm not an expert on identifying betting lines, so I'm not certain. Why don't you please enlighten me? >> well, it's clear to me that you can't tell. And that's the problem because the average consumer also can't tell.
▶ 1:45:21Um, here, you see that the results from the prediction market and the state regulated gaming entity and the lines that are put on these sports bets aren't much of a difference yet they are regulated completely differently. And although the odds are functionally the same, the outcome for the end user is the same. Consumers couldn't care less if they're using an official sports book or engaging with a prediction market. The purpose of engaging in the activity for monetary gain is the same. So here's the problem, Mr. chairman.
▶ 1:45:50Tribes in my district and across the nation have gone through decades long negotiations, agreements and settlements with states and the federal government to have the ability to engage in sports betting. States themselves have as well. They've built out legal gaming systems with compacts, licensing, integrity rules, age verification, and consumer protections.
▶ 1:46:13So when a federal agency like the cftc allows prediction markets to bypass these established long standing legal requirements, but under a different label and uses loopholes to evade regulation and consumer protection standards. It undermines tribal sovereignty and state protection. What this means, in practical terms, is that tribal communities like the pueblo of laguna in my district, which I just visited, are losing out on vital revenue to pay for their child care, education, infrastructure and the overall well-being of their community.
▶ 1:46:44Not fair. Right now, I understand the cftc role is to oversee derivatives markets. Traditionally, that has meant helping businesses hedge real economic risk airlines, hedge fuel costs, farmers hedge crop prices. That is very different from putting money on the outcome of a baseball game. On a prediction market, consumers can trade on weather.
▶ 1:47:03As an example, astros second baseman jose altuve hits a home run in tonight's game against the rockies, does a contract on a single player's performance on a single statistic, hedge any real economic risk? >> congressman, there are many risks that could be hedged through various contracts in our markets. The bottom line is that these markets need to be well functioning and comprehensively regulated by the cftc.
▶ 1:47:29Our statute mandates it, and we'll continue to do it well. >> commissioner, with all due respect, I don't think this is hedging. I think this is a bet, as is clearly outlined, uh, in in the way that these transactions are taking place. And so let me make this clear, uh, the cftc was not created or intended to regulate sports gambling states and tribes have systems for licensing, integrity monitoring and responsible gaming such as age verification and addiction support and enforcement.
▶ 1:47:56If this product looks like sports betting, the public should expect sports betting type of protections and regulations. So at the end of the day, this comes down to a simple question are we regulating real economic risk, or are we allowing prediction markets to steal billions of dollars in an unregulated, free for all with no consumer protection?
▶ 1:48:16As congress and the cftc turns a blind eye, the cftc should focus on ensuring that the integrity of the derivatives and commodities markets, ensuring that farmers and businesses receive fair prices and protections, and preventing our country from facing another financial crisis. That should be the focus. I believe the cftc does not have the know how, and it doesn't need to be focused on sports betting, because our tribes and our states can't do that.
▶ 1:48:41Now, in your earlier comments, in your introduction, you mentioned what you were focused on was modernization, rapid speed and response to innovation. And that is your focus. Now, what I did see with rapid speed was the withdrawal of the 2000 2024 proposed rule on political and sports contracts.
▶ 1:48:58What I would also similarly like to see in terms of that rapid speed and response to innovation and modernization is actual regulation, so that we can allow our tribal communities, our tribal nations, with their own negotiated contracts, not to lose out on vital revenue for their communities. As these event contract managers enter states like new mexico, where online gambling is already legal.
▶ 1:49:24This is crucial for our tribes, and I suggest that you talk to the indian gaming association about how they feel about this, because they do represent gaming casinos on tribal nations all across the country. Thank you, Mr. chairman. Thank you chairman I yield back. >> gentleman yields back. Given the fact that votes have been called series, the committee should now stand in recess until the until five minutes after the last vote is called. So I encourage members to return here to the hearing room. At that point, we are in recess.
▶ 2:53:14For holding the important hearing today. And thank you to chairman seelig. Being here with us. Mr. chairman, the committee has for years heard about the danger of the customer protection fund's potential insolvency. In fact, congress passed legislation creating a separate account to allow the operations of the whistleblower office to continue in the event the fund becomes insolvent. But this is a temporary fix which congress keeps having to extend.
▶ 2:53:39The cpf pays out whistleblower awards, a very important function. If whistleblowers do not receive the rewards they are entitled to, I'm concerned. Confidence in the program will be lost, discouraging future whistleblowers from coming forward. Can you discuss the benefit of this program and now how it has been an important mechanism for cftc to fulfill its mission? >> congressman, thank you for that question.
▶ 2:54:08I believe in the whistleblower program. It's really a critical program for people that are afraid to come forward when they have information that could help us prosecute a case, whether it's in a market manipulation matter or a registration failure or anything else. It's really important that people are willing to come forward with information that could help further an investigation.
▶ 2:54:32And I do have a concern that if these incentives are not provided to the marketplace, that people will choose out of fear of retaliation or for other reasons not to come forward. And so we greatly appreciate the ability to to offer whistleblower rewards and are really focused on making sure this program continues on within the agency. So thank you for your efforts in congress to help support the program. >> Mr. chairman, do you support a permanent legislative fix to the cpf and whistleblower office funding issues?
▶ 2:55:04Additionally, what does congress need to do to address these issues with the fund? >> well, congressman, it's very important that we have adequate funds to be able to provide whistleblower awards. And there are times when the fund can be strained, and that really undermines the ability of the program to function. So we support efforts to continue to continue to make sure that the funds available.
▶ 2:55:26We have been providing technical assistance on various pieces of legislation that can help make sure that the fund is always available for market participants. >> we've also received concerns or heard concerns that payments to the whistleblowers in certain instances have been delayed. Can you tell us what you're doing to ensure that there are timely payments of these rewards?
▶ 2:55:51>> congressman, we're on track to provide several rewards in the days to come, and I believe will exceed the amounts paid out over the past two fiscal years. So we're certainly taking this very seriously. But it's very important that we continue to support the fund with with adequate funding. >> Mr. chairman, you're no doubt aware that cftc authorization of appropriations last expired back in 2013.
▶ 2:56:14How how does operating without a current authorization affect the commission's ability to plan long term and to attract, retain and retain specialized staff and invest in modern oversight tools? >> well, the cftc, under my leadership, continues to be an effective market regulator, and we will continue to do so as long as we've got appropriations.
▶ 2:56:42And of course, it's great to have reauthorization where we have a definite plan for the ability to perform our key functions. But we're of course, happy to work. However, congress chooses to fund us. >> thank you.
▶ 2:56:59And in the commission's march 12th, 2026, prediction markets advisory staff noted that sports related event contracts are generally consistent with core principle three when the settlement outcome depends on the aggregate performance of multiple participants over an extended period of play.
▶ 2:57:17Does this language indicate that it is the commission's view that proposition style bets those not dependent on performance over an extended period or an aggregate outcome would not satisfy core principle three, and therefore may fall outside permissible event contract activity under existing cftc regulations.
▶ 2:57:42>> well, congressman, the cftc staff has put out this advisory that you're referencing that gives some considerations for the marketplace for our exchanges that are self-certifying contracts to consider as they're evaluating contracts and putting them up for self-certification. We do have an advanced notice of proposed rulemaking out that solicits feedback on this issue, among others, and we're hoping to provide more concrete rules and regulations around the self-certification process in the near future. >> thank you, Mr.
▶ 2:58:11Chairman, I yield back. >> thank you gentlemen. Gentleman yields back. Now recognize the gentleman from illinois, Mr. sorensen, for five minutes. >> thank you, Mr. chairman. Um and thank you, chairman, for being here. I appreciate your time and being forthright with us here in the committee today. I represent illinois's 17th district. Now we're far removed from the big city of chicago. Um, it's a tough place to live. Um, but we persevere like no one else.
▶ 2:58:37It's that part of america where if you put in a hard day's work, you come home and you're proud of what you accomplished. Um, this is also a place where people make just enough to get by these days, uh, in my neighborhood, we try to put a couple of bucks into a savings account, but we don't have the money to trade stocks or bet on what could happen in the future.
▶ 2:58:57You know, I understand what my neighbors feel when they tell me how mad they are when there are rampant insider trading here in washington, dc, because my neighbors back home should be able to trust the people in washington, dc and trust that you are going to hold them accountable. But now we've got prediction markets and get rich quick schemes that are only realistically available for people who are now in the know.
▶ 2:59:27My neighbors are not in the know. There's no limit to what someone can make money on these days, from how long a white house press briefing will last, or the ramifications of trump's war in iran. To be honest with you, it's sickening. And in illinois, home to one of the cftc's regional offices, reports say that every one of the investigative attorneys have left the office.
▶ 2:59:51Yesterday, it was reported by bloomberg that the cftc is launching an investigation into oil futures contracts that enriched a potential insiders, just as donald trump went to war with iran. Will you tell this committee that you will hold to account everyone who violated the law, even if they are connected to the white house or the president's family?
▶ 3:00:12Please be clear with us, >> congressman, as I was saying in my opening statement just about an hour and a half ago, we have a zero tolerance policy when it comes to insider trading, fraud or manipulation, and we will take action against any bad actors in our markets. >> I appreciate your words. You have an incredible opportunity to rebuild the trust that was lost. What is the most important step that you're taking?
▶ 3:00:38And in no jargon, I mean, speak to me as if you're speaking to the 3900 people in morrison, illinois. >> congressman, I've made very clear we will continue to ensure that our markets are well functioning and that they are free from fraud, manipulation and abuse. This is our core responsibility as an agency. We're not going to pursue political pet projects. We're going to focus on market integrity. >> I appreciate that my colleagues have asked similar questions, but I wanted to kind of reframe the issue.
▶ 3:01:06So yes or no, given the continued steady growth of industries and markets that you oversee, do you think it's reasonable to believe that the agency can be effective in the year of 2026, with staffing levels that are at the lowest since the great recession? >> congressman, as I said earlier, the agency is functioning better and more effectively than it ever has. And this is thanks to the leadership of the president. He has made it a mandate to ensure that our agencies are well functioning and accountable to the taxpayer.
▶ 3:01:35And the staffing that we're ramping up on is speaks for itself. Well. >> if you just said that you're working better, then why are you hiring anybody? >> congressman, we continue to bring on talent where it makes sense within the building. We're actively actively recruiting and hiring. As I've made clear, we have postings on usa jobs, and this is to fill posts that have been vacated by former staff. That said, we have not let up on our mission.
▶ 3:02:04We continue to fight for the american people and ensure that our markets are well functioning and free of fraud, abuse and manipulation. >> are you and will you be working with international partners to oversee insider trading that gets around your enforcement? >> congressman, we, of course, on a regular basis are consulting with our foreign counterparts throughout the world. Uh, it's very important that we do so because fraud and manipulation and market issues span our borders across our borders. And so we're actively in conversations with foreign regulators on a frequent basis.
▶ 3:02:35>> last year, republicans on the appropriations committee proposed cutting the cftc funding from fy 25 levels by 8%. Can you tell the american people that the derivative markets are safe with the cut in funding like that? >> congressman, as I've made very clear, we continue to police our markets. We continue to comprehensively surveil our markets, and we will do so with whatever staff we have.
▶ 3:02:58We are using tools like ai and automation throughout the building to make the agency more efficient, and I believe it's functioning better than it ever has under my leadership. And thanks to president trump's leadership. >> insider trading should be flagged and investigated. And it shouldn't matter who you are. If you violate the law, you go to jail. And I hope that you're able to do that for the people who are ripping off the people back home. Thank you, Mr. chairman, I yield back. >> gentleman's time has expired. Now recognize the gentleman from ohio, Mr.
▶ 3:03:26Taylor, for five minutes. >> thank you, chairman, and thank you, ranking member, for holding this hearing today. And thank you very much, chairman selig, for being here with us today and sharing your expertise. I represent a very rural district in southern ohio. Before being elected to congress, I worked in the county prosecutor's office and was a small business owner for 25 years in the concrete business. One of my top priorities during my time in congress has been to reduce regulations and allow people to participate in the economy, without the government always breathing down their neck.
▶ 3:03:55Chairman selig, as cftc chairman, can you describe to me your approach to regulation and how you balance protecting consumers with promoting economic growth? >> thank you, congressman, and it's, of course, critically important that we both encourage growth and innovation in our markets, but also ensure that there are safeguards and investor protections.
▶ 3:04:13We can't have the american people paying the price for new ideas and new creativity, creative activities in our markets, what we're doing to make sure that consumers and investors are protected is enforcing our laws, enforcing the statute that is our key, um, mission, right? The commodity exchange act, ensuring that the exchanges are doing their job in surveilling the markets and protecting investors and of course, policing fraud, manipulation and bad behavior.
▶ 3:04:44>> thank you chairman. Another priority I have is making sure our federal agencies operate efficiently to try to match the speed of business, not the plodding pace of government. As congress works to reauthorize the cftc, we have the opportunity to make improvements to ensure maximum efficiency toward its mission to promote integrity, resilience and vibrancy of the us derivative markets. By all accounts, the cftc advisory committees serve a great purpose and provide great insight to the commission from people who utilize the markets every day.
▶ 3:05:11But one improvement I think congress can make is to streamline the advisory committee structure so that all advisory committees operate equally. And currently the agency has one advisory committee, the environmental and energy markets advisory committee, operating with different rules from the rest of the advisory committees. This makes no sense and only makes our government less efficient. I was proud to lead the cftc advisory committee improvement act with my fellow ohioan, congresswoman shontel brown.
▶ 3:05:37This bill improves the administration of the advisory committees by allowing the commission to establish them all in the same way. With that said, chairman selig, can you tell me a little bit about your plans to ensure the cftc is operating at maximum efficiency? >> congressman, I absolutely share your view that the agencies should run more like businesses, and we're taking measures to make sure the cftc is more efficient than ever before.
▶ 3:06:01One of the new technologies that we're incorporating throughout the building is artificial intelligence. We've authorized the use of microsoft 365 copilot, which is an ai tool that all the staff are being trained on, and this is going to make their jobs much easier. It's going to make them much more productive in their day to day tasks. It's going to allow them to do things like create new types of workflows for more efficient operations.
▶ 3:06:26We're also making sure that ai and automation is incorporated through the registration process. When new applicants are submitting forms and registration materials, we've also made sure that there's kpis in place, key performance indicators to make sure that when a new application comes through the door, there's real accountability and real milestones that the staff have to meet to make sure these things get done.
▶ 3:06:51Our statute has prescribed timelines 180 days for most applications, and we've got to hit that. It can't be the case that we extend every time when a new application is coming in, because we just can't do our job. So we're making sure that the staff are more accountable, that they're more efficient. And of course, we're hiring up where it makes sense to make sure that we're getting some new viewpoints from the private sector within the building.
▶ 3:07:15>> since you're here and you have the captive audience, are there other areas where congress could be helpful to the cftc and operating more efficiently? I appreciate your testimony today that it's operating more efficiently than it has in recent years, but are there other ways we could be helpful? >> well, of course we we appreciate your support for the agency. We are performing really mission critical tasks of ensuring that our markets are well functioning and have appropriate safeguards for our market participants.
▶ 3:07:41I would very much appreciate the opportunity to meet with your office and talk more about how we might be able to work together to ensure that the agency has all the resources it needs, but I can assure you we are well functioning today and will continue to do so in the future. >> I look forward to that. And thank you again. Chairman. I yield back, Mr. chairman. >> gentleman yields back. I thank you, gentlemen. We're next. Recognize the gentleman from virginia, Mr. vindman, for five minutes. >> thank you, Mr. chairman.
▶ 3:08:12Chair selig, thank you so much for joining us today. This hearing couldn't have come at a better time. In recent weeks, we've seen countless news stories about individuals making massive profits in prediction markets on bets related to national security. For example, bets on whether ali khamenei leaves office before march 1st, 2026, whether the us would strike iran by february 28th, whether the us confirms that pilots, the pilots in iran were rescued, and when the us would announce a ceasefire with iran, I ask unanimous consent to enter into
▶ 3:08:44The record. An article from april 9th from the washington post titled prediction markets are back on the spotlight this time because of the iraq war. >> without objection. >> just recently, the white house warned its staff not to engage in insider trading on prediction markets. I'm sure you agree that this is highly concerning and endangers national security. I'm hoping you can help clarify the seriousness of this issue. And I'm not trying to play. Gotcha.
▶ 3:09:12I hope we can work together to crack down on these illegal and dangerous bets. So I'm going to ask you a few ethics related questions, and I'd like you to provide a yes or no answer, please. Should any government official be allowed to use classified or nonpublic information to profit on prediction markets? >> congressman, it is illegal to utilize any nonpublic information to trade in our markets when you're misappropriating that information. >> okay, so I'll take that as a yes. Um.
▶ 3:09:39No, no, sorry, I don't want to put words in your mouth. Could a senior official with advanced knowledge of military operations use prediction markets in a way that could incentivize decisions that endanger service members or compromised national security? >> congressman, as I said, it is illegal to trade on inside information. >> I'm not asking you about the legality. I'm asking how the markets can be used. >> congressman.
▶ 3:10:08Markets have been used to engage in fraud and manipulation insider trading for centuries. >> okay. So I'll take that as a yes as well. If someone with insider knowledge places a large bet right before military action, could adversaries monitoring these markets be tipped off to what's coming? >> congressman, I of course, there are instances where bad actors are going to engage in abusive trading practices. The purpose of the.
▶ 3:10:34>> I'm just asking, actually, if people monitoring the markets can use that information better to to discern what's going to happen. >> congressman. Of course, there are instances where people could obtain information. It is illegal for them to utilize that to engage. >> again, I think what you're. That's a yes. Simply.
▶ 3:10:52Look, I served 25 years in the army and, um, some of these accounts were opened within days and, and weeks and, uh, bets were placed within 24 hours of some of these actions occurring and 24 hours in a military operation is a lifetime. It's a lifetime to either remove highly enriched uranium. It's a lifetime to replace in place air defense assets. So this is in fact, serious threat to our national security.
▶ 3:11:22So you've said you want the us to be a market capital of the world, and that we're watching every trade. Will you commit to robust enforcement, ensuring anyone trading on government or military information is held accountable, regardless of their political party? >> congressman, as I've said countless times today, we have a zero tolerance policy. That's zero tolerance.
▶ 3:11:45That means that we will hold whoever's engaging in fraudulent, manipulative, or insider trading activity accountable to the american people. >> well, I think what this boils down to, and I'm going to give you credit for agreeing with the fact that these are dangerous issues related to national security. So I'm going to I appreciate your commitment to holding bad actors accountable and hope to work together to crack down on anyone, endangering our national security and our troops with these types of bets.
▶ 3:12:17That's why I sent a letter to polymarket last week instructing the company to preserve and share with congress all information related to suspicious bets on national security matters that may link to government officials. I ask unanimous consent to enter my letter into the record. >> without objection. >> thank you, chair. So we need to find out who's placing these bets, no matter how high level or well connected they are, and hold them accountable.
▶ 3:12:40Finally, my office is currently drafting legislation to increase penalties for officials convicted for illegally trading on events contracts with national security implications. Such a measure is necessary because the pattern of massive prediction market stakes in the hours immediately before U.S. forces deploy or take action is alarming and dangerous, and I would hope that if you in your in the event that you find that there's wrongdoing, are prepared to immediately refer these matters to doj.
▶ 3:13:10I look forward to working with you on this matter. Thank you. I yield back. >> gentleman's time has expired. Now recognize the gentleman from alabama, Mr. moore, for five minutes. >> okay. Thank you, Mr. chairman. The chairman thank you for being with us today. Um, I'm proud of the work of the work that this committee did on the clarity act to help give digital assets markets the rules they need to grow in the united states. A lot of that responsibility is going to fall on cftc, obviously.
▶ 3:13:37Can you talk a bit about how the commission is getting ready for that authority and how you're working with the sec now to build a clear framework that can last into the future administrations, and so do. And also so we do not need to back up regulatory information by enforcement. >> thank you, congressman, and I applaud this committee's efforts to pass bipartisan crypto asset market structure legislation.
▶ 3:14:05As I've made very clear multiple times today, I believe that this is absolutely essential for the country to lead in innovation, and I am very supportive of this legislation. It's been too long in the united states where we've pushed innovators offshore. We've regulated by enforcement, and the lack of clarity around the asset classes just caused it to really languish here in the united states.
▶ 3:14:30I think that legislation is key, both to identify what's a security and what's not, and have some certainty in the statute as to what is subject to the sec's authority and what subject to the cftc's authority. I also believe it's very important that we register these platforms under a federal regulatory scheme. There has been a patchwork of different state licensing arrangements under the money transmitter laws of various states, as well as the virtual currency business laws that have been newly enacted.
▶ 3:14:58And some states have no laws whatsoever. And so having a federal scheme that's uniform across the country is really essential to protect consumers that are using these crypto assets every day. >> and certainly, chairman, we appreciate the work the commission's doing, um, to bring more clarity to digital asset markets. The one thing I hear from a lot of folks in the space is the concern that software developers and people building blockchain infrastructure could once again be caught up in regulation by enforcement under future administration.
▶ 3:15:28Can you talk about what the cftc is doing to help build durable framework that protects people who are simply building software and not holding customer funds? So we do not go backwards a few years from now. >> absolutely. One critical endeavor that we have supported over at the sec has been, uh, the codification of an interpretation on what's a security and what's not. And the cftc signed on to this interpretation. So it was done through a joint rulemaking.
▶ 3:15:55And it clarifies the sec's view as to which types of crypto assets are securities and lays out a very clear taxonomy. And it also has an interpretation related to the howey test, which has been the bane of the industry's existence for so long because of the many judicial opinions, uh, interpreting, you know, the definition of an investment contract. And so this is laid out very clearly as to how the sec is looking at things.
▶ 3:16:21Now, we at the cftc have a view as to what's the security and what's not. And we're starting to implement things like tokenized collateral relief. Um, clarifying the, the status of stablecoins and how that can be used within our registrants. And so it's really critical that we start to clarify things in the interim, but legislation can help lock it in for the long term. And that's why we're so supportive of that effort. >> and I appreciate you, again, taking time to appear before this committee. And the words of your march 3rd ex post.
▶ 3:16:52Potus is right. The clarity act must pass and I agree. We need future proof market structure now so america can lead in the world in innovation under president trump. I want to conclude my time by encouraging my colleagues in the senate to pass market structure. And with that, Mr. chairman, I yield back. >> gentleman yields back.
▶ 3:17:22Now, please recognize the gentleman from california, Mr. carbajal, for five minutes. >> thank you, chairman thompson, and thank you, chairman selig, for being here today. You have a tough job. Uh, chairman selig, as you are aware, concerns continue to grow over the use of prediction markets to wager on outcomes involving elections, government activity, war and other geopolitical events.
▶ 3:17:48The cftc, lack of enforcement on betting in these contexts poses clear risks to public safety, national security, and has fostered conditions for potential insider trading. It has become so concerning that even the white house has warned its staff not to engage in such trading on prediction markets.
▶ 3:18:11Congress has previously identified categories of events event contracts that may be contrary to public interest, including terrorism, assassination, war, gaming and illegal activity. Chairman selig, do you believe event contracts related to these categories I mentioned are contrary to public interest?
▶ 3:18:34>> congressman, we're approaching this issue through rulemaking, and we've put out an advance notice of proposed rulemaking, so I won't prejudge the outcome of that process, where we're receiving input from stakeholders throughout the country on these issues. But we will take those comments into consideration and make sure that we're adhering to the comments and make and putting rules in place that are going to address these concerns. >> in your view, are there subjects that should be clearly off limits for prediction markets?
▶ 3:19:04>> well, congressman, again, I'm not going to prejudge the rulemaking process. I believe that in a free market, it's really important to have access to financial tools, hedging tools, risk management tools and a broad range of different types of commodities as our statutes designed, of course, with a very broad definition of commodity. But I won't prejudge the the rulemaking process. We're going to take all the comments and make sure we get the rules right. >> chairman selig, uh, it is alarming and concerning to see advertising that sports betting is legal in california.
▶ 3:19:34I know the tribes and the people of california would disagree. Voters rejected two different sports betting propositions in 2022, in one of the most expensive ballot campaigns in us history. But now these platforms are operating in california with little oversight, offering wagers on tribal lands.
▶ 3:19:53What steps is the cftc taking to ensure that derivative markets are not being used to offer gambling style products outside established state and tribal regulatory systems? >> congressman, I think it's very important to distinguish between when you say gambling style products and derivatives. Derivatives are a type of financial instrument. And as our statute prescribes, they can be traded with a broad range of different underlying assets.
▶ 3:20:20And it's very important that we continue to oversee these markets comprehensively, whether the market is a sports related derivatives contract, a political derivatives contract, or a derivative on corn or grain. These are derivatives instruments. They trade on federally regulated exchanges with order books, with clearinghouses, and all the investor protections that you would expect for very sophisticated financial markets. So we will continue to enforce our statute.
▶ 3:20:44But of course, it's critical that we get input on potential rulemaking in the area of prediction markets, as there are some unique considerations around retail participation in these markets. Among other things. >> has there been any instances of fraud that you have found to date?
▶ 3:21:03>> well, congressman, I can't speak to any particular investigation or the, you know, details of investigations, but we are investigating insider trading, market manipulation, fraud and so on and so forth in these markets, just like any other. And the exchanges are doing the same. I believe she is now called out two instances of insider trading, market manipulation in their markets and find participants in those markets.
▶ 3:21:28>> chairman selig, with the increasing number of questionable trades taking place as recent, there are growing concerns that those placing these bets may have insider knowledge, whether it's the trade in which a user reportedly earned over $400,000 by correctly betting on nicolas maduro being out of office just hours before the operation, or the account that made hundreds of thousands of dollars by wagering on the us striking iran and or the removal of ali
▶ 3:21:59Khamenei. These incidences raise serious concerns. Many americans hear about these trades, which appear to resemble potential insider trading, but hear little about what the agency is doing to hold those involved accountable. What steps concrete steps are you taking other than general statements to find these people accountable, congressman? >> they will be held accountable. We are ramping up our enforcement program.
▶ 3:22:25We have an excellent director of enforcement and david miller, who is both former cia and former southern district of new york prosecutor. And he will be building out our team. And we are a cop on the beat. We'll make sure that those who engage in bad activities are held accountable. >> thank you. I yield back. >> gentleman's time has expired. I recognize the gentleman from iowa, Mr. nunn, for five minutes. >> well, thank you, chairman thompson. Thank you, chairman selig.
▶ 3:22:51You bring a wealth of experience, both at your time at the sec and certainly at the commodities and futures trading commission. Guys like me back home in iowa. We appreciate this because here's the reality. I've got a host of 87,000 farm families who wake up every morning not knowing what corn or beans is going to look like until the closing bell, and that is what they look to the cftc to be a leader in. And just as a point of reference here, corn is at 456 a bushel and beans are up to 1165.
▶ 3:23:18We're going to hopefully jack that up before our closing bell today. Look, the reality here is that I'm encouraged by your early focus on reducing regulatory burdens. But I want to make sure that we keep the plow point in the right direction, as it were, because farmers and ranchers deserve the cftc that stays laser focused on market integrity, accessible hedging, and protection against manipulation. So as you get to work here, we want to be part of your team as you march out with the ag committee.
▶ 3:23:47Now, as we represent a number of farmers who depend on future and option to mitigate risk. I was glad to see that you have relaunched the agriculture advisory committee. That is a direct investment, making sure that ag continues to be at the forefront with the cftc is doing. It's meaningful and it signals that you're headed in the right direction. I'd also like to make sure that all the discussion today has been on prediction markets for the most part. I want to hear from you.
▶ 3:24:16Where does farm and production commodities rank as a list of your top priorities? >> this is the top priority. The cftc grew out of the department of agriculture. We have our roots in that community and will continue to service it. As I said, the agriculture community will always have a seat at the table in this administration. >> that's exactly what I want to hear, and I know that makes our farm families very happy to hear because we've had a great relationship with the cftc.
▶ 3:24:42Moving forward, I'm going to transition to something that my senior senator, chuck grassley, who 20 years ago I had the privilege of working with, has made it his number one priority. And we're working on together. This is the whistleblower fund. Now, chairman siegel, um, senator grassley has worked to strengthen the cftc whistleblower efforts and whistleblowers who have done everything right. Challengingly have not been paid some waiting more than a year for the award from the office itself to determine what they were owed pro-rata payments.
▶ 3:25:10And authorities exist for exactly this situation, so we can call out bad actors and recognize those who are doing the right thing. I'd like you to come alongside me here in committing that you'll use that authority today to help make sure that whistleblowers are compensated when they do the right thing. >> I believe strongly in our whistleblower program. I'm always concerned that there's a risk of retaliation if, you know, when people are fearful to come forward because they're going to be retaliated against.
▶ 3:25:37And so we've got to protect that fund and make sure we're continuing to pay out whistleblower awards. >> I'm heartened by that. And I'm also heartened by your staff, who I know is also fully committed to this as well. We want to make sure we're all doing the right thing. When it comes to your background in both the sec and cftc harmonization, I'd like to say thank you for reducing the duplication between these good markets.
▶ 3:25:59Could you talk to us a little bit about one of the top areas where you feel you can move the most rapidly in eliminating inconsistent requirements under the existing authorities before you? >> absolutely. One area that we're keenly focused on is substituted compliance.
▶ 3:26:15So for too long, duplicative registered entities such as a broker dealer, fcm entity that's both a broker on the sec side and on the cftc side, have been strangled with these different regulatory requirements. And working together, we can knock out some of these requirements that are duplicative or inconsistent in some cases, still making sure there's no gaps, but but working closely together to make sure that we're harmonizing our rule sets.
▶ 3:26:42And in some instances, relying on one regulator's a primary regulator so that we're not over, uh, putting too much work on one regulator versus the other. It's important also to recognize that there are areas where we can free up capacity to more effectively regulate new registrants, as opposed to working on duplicative regulating the ones that the sec already regulates. >> and I think that will help not only eliminate the duplication, but also the timeliness in which we can execute on that. So that is a encouraging hear back.
▶ 3:27:12Look, I'll end with this. Small iowa producers are facing higher costs, fewer intermediaries, and a complex products. As you talk about vertical integration and market structure reform from your perspective, whether it's a hog farmer in altoona, iowa, or a crop grower in red oak, what does that actually deliver to the little guy with this type of integration? >> well, this is critical for everyday americans when you're using the derivatives markets to hedge risk, you have to go through an intermediary.
▶ 3:27:36And the more regulation we have on these intermediaries and some of them, as I mentioned, are both cftc and sec regulated. So the more duplication and regulatory burdens that gets passed down to the market participants, the farmers, the ranchers, the producers, and then the consumers who are buying their goods. So this is going to make our markets better and it's going to reduce costs for everybody. >> keep up keeping the farmer first. Thank you very much. I yield back my time, Mr. chair. >> the gentleman's time has expired. I now recognize the gentleman from illinois, Mr.
▶ 3:28:07Jonathan jackson, for five minutes. >> thank you, chairman thompson. Um, thank you, chairman celik. As you know, um, I'm sure. Section 342 of the dodd frank authorizes the office of minority and women inclusion at all other financial regulators, including the sec, where you previously worked, the only federal financial regulator without a statutorily authorized o w I is the cftc.
▶ 3:28:31A previous hearings before this committee, former cftc chair russ benham explained how the cftc s o m w I had improved the agency by establishing partnerships with minority serving institutions and rural colleges and universities.
▶ 3:28:54Given the good this office has done, it is a shame that your predecessor, acting chair caroline pham, appears to have done away with the o m w I. It is no longer appears in the cftc website. The outreach for minority and women institutions or on its organizational chart, or at least as a separate office. I ask you a question.
▶ 3:29:18Are you willing to return the office of minority women, um, back to the cftc, or do you support the outgoing acting chair's actions? >> well, congressman, it's very important that we're accountable to the taxpayers and that we're using our resources and staffing the building effectively. Um, so of course, we're considering, um, each office, making sure that each office is performing an important role. And so I would certainly evaluate that.
▶ 3:29:44It's not something that I've evaluated yet, but we're, we're very happy to consider that and work with your office to, to review it. >> would you be willing to comply with the statutory, uh, compliance of other offices in the financial regulation? >> well, congressman, we're bound by the commodity exchange act. And so to the extent this is not something required in our statute, of course, we're not going to create new, uh, statute out of thin air. That's okay. >> thank you. Let me reclaim my time. I thank you for that.
▶ 3:30:11As we talk about the greater transparency that the cftc wants to do for robust price discovery, the mechanism, the careful development of derivative products. Now we're going on to the predictive markets. We're talking about supporting hedging without undermining the market integrity. Talking about the liquidity supply chains. And I used to trade at the chicago board of trade. So I'm very familiar with this. You're currently the only commissioner at the cftc, correct? >> that's correct.
▶ 3:30:40>> and previously there were five commissioners. Is that correct? >> at times serving five at times there's been one. There's been two various numbers throughout the years. >> considering the enormity of this job, do you feel that you could potentially be overwhelmed? >> congressman, I am performing the role in a very effective way. I'm not concerned about the lack of commissioners, but of course, this is a decision for the president. And to the extent he appoints additional commissioners, I look forward to working with them.
▶ 3:31:11>> in the swap markets alone, there's over $400 trillion of notional value. And we're looking at from all the sophistication with critical minerals and supplies. How would you say you prioritize how you look at the markets and the regulation necessary every day? >> well, congressman, I'm lucky to have a large building filled with lots of dedicated career civil servants.
▶ 3:31:32And so we are comprehensively looking at the markets, whether it's critical minerals, energy, agricultural products or new digital assets and prediction markets. We perform our role to make sure that the markets are well functioning in all asset classes. >> thank you so much. Do you foresee any potential crisis on the horizon that we may be confronted with in this new world of rising energy costs, as well as conflicts? >> congressman, what's important is that we're surveilling these markets.
▶ 3:32:02We, of course, are cop on the beat. We're making sure that to the extent there's any sort of threats to the markets, whether it's fraud, manipulation, insider trading or policing that systemic issues, of course, we're working together with our counterparts throughout the government, the sec, treasury and other regulators to to ensure that there's not a threat on the horizon. But we have to be vigilant because there's always a risk.
▶ 3:32:29>> well, just like we have price discovery, um, the office of minority women and, uh, the inclusiveness that was for talent discovery that too often these corridors have been segregated because of culture, because of history, because of time. And if we're going to recruit the best, have the best, I think that it would be of great value to yourself and to this nation.
▶ 3:32:52If you embrace the previous work of the officers of minority women and inclusion to have more talent discovered, there may be people that can offer more talent that come from, um, untraditional, uh, avenues that could serve our nation well and serve your department on that, I yield back. Thank you chairman. >> gentleman yields back. Now recognize doctor baird from state of indiana for five minutes. >> thank you, Mr.
▶ 3:33:21Chairman and ranking member uh, really appreciate the opportunity to be here today with you. And Mr. chairman, thank you for being here and sharing your input with as we make these kind of decisions. But anyway, uh, my question deals with this, uh, back in june of last year, uh, the previous acting chairman announced a one year extension of the commission's current headquarters lease and a new headquarters in southwest dc to come online this june.
▶ 3:33:50And so that's just about six weeks away. So would you would you mind giving us an update what the status is of that new lease and the new headquarters? >> congressman, unfortunately, under the prior administration, there was a focus on rethinking office space and a culture of work from home and flexible hours. And the president has been very clear that it's back to the office and has said so through executive order.
▶ 3:34:17So we're focused on working together with gsa to identify a proper office space that's going to be able to house as many of our workers as possible. We want to make sure that we're close to 100% in line with the president's executive order, so we're working hard to identify a proper office space, and we'll be moving in as soon as we, uh, are complete with that process. >> so I understand from that you're still moving ahead.
▶ 3:34:43It's just you're getting lined up with the rest of the requirements. >> congressman, we are able to, to stay in our current space and we're evaluating new space for, for the future. Um, but rest assured, we'll make sure that we have adequate office space so that everyone can be in the office that wants to be. >> so let's turn to another area then. Uh, you know, I represent a rural district where agriculture is the backbone of our economy.
▶ 3:35:09Our farmers depend on stable, transparent commodity markets every day to manage risk and stay in business. And so we're also home to purdue university, a leader in agriculture, data driven research that helps shape the future markets.
▶ 3:35:22Given my background in science and my district's deep ties to both production, agriculture and innovation, I'm particularly interested in how the commission's balancing its focus on emerging markets like digital assets and new trading structures, and while continuing to ensure that traditional producers have a fair access to reliable risk management tools.
▶ 3:35:46And so with that, uh, my question deals with, uh, with how is the, how is the, uh, cftc ensuring these markets remain transparent, liquid, and free of manipulation? >> congressman, we take this responsibility very seriously. We've got to comprehensively surveil our derivatives markets, whether it's markets for digital assets, grains, metals, or anything else.
▶ 3:36:14Uh, we don't discriminate on the product. We're making sure that the markets are well surveilled and we're policing fraud, manipulation, insider trading, and all of these markets. We are working to ensure as well that innovators are able to develop their software systems here, build their new markets here in the united states, rather than pushing that off through enforcement.
▶ 3:36:35Um, so part of our mandate is responsible innovation, and we're considering tweaks to our regulatory scheme to accommodate these new technologies. But rest assured, we are surveilling, we're making sure that the markets are well functioning in all asset classes. >> so I'm glad to hear that because you recognize how important, you know, you're dealing with with farmers lives when you're talking about and their life, their income and livelihood. So I'm glad to hear that.
▶ 3:37:04Um, you know, one quick, one quick last question. How's the, how is the commission then working with agriculture advisory committee to incorporate real world feedback from producers into the regulatory, uh, prospects. >> we're taking working together with the agricultural community as a top priority.
▶ 3:37:23We have for the first time, actually, it's very surprising, uh, put out in agriculture webpage on the cftc website, um, and we're soliciting feedback from the full spectrum of participants in these markets. And farmers, ranchers and producers are regularly coming in to meet with us. I've appointed a senior agriculture advisor in my office.
▶ 3:37:43Uh, we've also built out as, as you mentioned, the agricultural advisory committee, which provides a more, um, robust venue for people to provide commentary to the commission through reports. Uh, we're also taking regular meetings with these folks in my office and throughout the building. So it's very important that all of the agricultural community feels welcome back at the commission. We're here to help and take feedback on all manner of issues. >> thank you.
▶ 3:38:13And I must tell you, you can share that, uh, had a lot of producers that came to the ag day that the president had. They really enjoyed it. >> a gentleman yields back. Now recognize the gentlelady from connecticut, miss hayes, for five minutes. >> thank you, Mr. chairman. Thank you for being here today.
▶ 3:38:35In december, the connecticut department of consumer protection issued a cease and desist order to kelsey, robinhood and crypto.com for conducting unlicensed online gambling, specifically sports wagering, in connecticut. States that have legalized sports betting have regulatory frameworks to protect the integrity of the sports wagered on, as well as consumer protections such as resources for gambling addictions.
▶ 3:39:00Uh, the d d p gaming director chris gilman stated. These organizations were operating outside of regulatory environment, posing a serious risk to consumers who may not realize wagers placed on these illegal platforms offer no protections for their money or their information. Chairman selig, this was around the same time you were sworn in as the chairman of the cftc.
▶ 3:39:25And under your leadership, the cftc has filed a lawsuit against three states, including my home state in connecticut, for attempting to regulate online gambling within their jurisdictions. As you know, more than 34 states and territories have filed amicus briefs asserting their regulatory authority over prediction markets. In your short tenure as chairman, you have clearly and publicly expressed your views on the jurisdiction of cftc.
▶ 3:39:51In interviews, you recently said you recently told coindesk that the agency will continue to defend its exclusive regulatory authority to oversee prediction markets in court, specifically saying, quote, it doesn't matter if it's on sports, politics or anything else, if it's a if it's if it's a validly offered product within a cftc regulated exchange, then we regulate that.
▶ 3:40:17End quote, when the federal government steps in like this, it can undercut the work that states are already, um, pursuing to protect their residents. Chairman sealing would congressional clarity on the roles and responsibilities of states regarding prediction markets help resolve this ongoing legal dispute? And are you willing to work with congress in a bipartisan manner to clarify that issue? So it's not a back and forth between the state and federal governments over this regulatory process?
▶ 3:40:47>> congresswoman, I appreciate the concern for states rights and all of that, but the statute is very clear that we have the exclusive regulatory authority when it comes to commodity derivatives that are offered on a designated contract market. We will continue to assert ourselves in litigation to defend that. Right.
▶ 3:41:07Of course, we're happy to discuss policy, and we've put out an advance notice of proposed rulemaking to make sure that we get the rules right for these products, but they are exclusively within our regulatory remit. And it's concerning, as the chairman of the agency, when states try to nullify federal law. So we will continue to defend that law in court. But of course, we're happy to discuss policy, and that's why we have an advanced notice of proposed rulemaking, which we'd welcome all states and stakeholders to engage. Interesting.
▶ 3:41:36>> it's interesting that you bring up an advanced notice of proposed rulemaking for public comment that went out, seeking feedback on how the agency should proceed on the issues of jurisdiction that you're talking about. But given the extensive lengths to which the cftc has gone to block state regulatory authority over prediction markets, I'm concerned that your organization will not give this feedback full consideration, um, during the rulemaking process.
▶ 3:42:02And in fact, today, you've said that you're not going to prejudge the public comment period. So can you tell me today how you ensure the opinions of stakeholders are considered in your federal rulemaking period? And additionally, if public comments are overwhelmingly opposed, what will you do to work that into any implementation going forward? >> well, congressman, there's two separate issues here. There's the issue of our jurisdiction, which in my view is very clear. But this is, of course, working its way through the courts.
▶ 3:42:32And part of this is being argued today in the ninth circuit. The second issue is the policy. We're very happy to engage with anyone who wants to comment on the policy, and that's why we've put this out for notice and comment from the public. And we have never said that a state can't engage on that front. We've never said we're not going to listen to the states. And of course, we're bound to listen to any comments under the administrative procedure act. So we welcome your state to comment.
▶ 3:42:58The concern is when states start suing our registrants. This is not the right fight. The fight is with us. If you want to go debate the policy, come on. >> can you repeat that when state starts suing? >> what? >> start suing our registrants, which is what we've seen. And that just wastes your own state's taxpayer dollars in suing participants that are complying with federal law. So if you want to fight with us, we'll fight with you in court. But the real work should be done in the policy spectrum.
▶ 3:43:29Come in and comment and we'll work with you all to get the policy right. >> well, thank you, I appreciate that. But I just would remind you that states attorneys generals are also elected by the people in those states, and they have a responsibility to ensure that they are fighting for the best protections for their constituents as well. I yield back. >> gentleman yields back. Uh, now I'm pleased to before, uh, uh, pleased to recognize our newest member on the house agriculture committee.
▶ 3:43:56David valadao, uh, from dairy farmer from california as, uh, joined the committee. And the gentleman is recognized for five minutes. >> thank you, chairman thompson. Thank you. Chairman seelig. This is my first hearing and, um, bad thing about being the newest guy on the committee is you. Everyone's already asked all the questions you wanted to ask. So, um, but I do want to touch on a couple things, and I appreciate you being here.
▶ 3:44:21The ability of traditional commodity contracts to self certify is absolutely vital to farmers, ranchers, producers, energy suppliers and others who need to hedge markets. And, uh, and I know that other aspects of this has been touched on, but how can the cftc ensure that the integrity of the cell certification model is preserved so that traditional commodity contracts remain readily, readily available for commercial users who rely on these markets for price discovery and price management or risk management.
▶ 3:44:52>> well, congressman, it's a pleasure to be able to testify before you as your first hearing. Um, self certification is absolutely vital. It's a really great innovation that's come in the commodities markets through this congress. And it allows us to quickly, as an exchange to quickly certify products, the cftc, without having to go through a full process of engagement with the staff.
▶ 3:45:16Now, it's critical that the exchanges take that responsibility to heart and that they evaluate each product to ensure that it's not readily susceptible to manipulation and meets our standards. And we work with the exchanges on that. We've done a great job under my leadership in providing guidance. We recently put out an advisory for event contracts, but in prior administrations, unfortunately, there's been a lack of clarity. And I've inherited a lot of these contracts in the market.
▶ 3:45:44So we're working quickly to ensure that there's protections for investors, that the exchanges are doing their job. And we very much appreciate the self-certification process because it allows for innovation in our markets. >> well, and in the ag world, making sure that you can protect or at least, um, protect from any of the risks out there on, on, uh, on the pricing side, especially when you grow as many different commodities as we do.
▶ 3:46:08And I mean, I know other states do as well, but my district, about 400 different types of commodities. So it's something we take seriously. Under the current statute, the cftc has the authority to determine whether or not an event contract is contrary to the public interest. The statues go on to list such things as war, terrorism, gaming, and assassination as reason to not list a given contract. The cftc has taken action to block events.
▶ 3:46:34Is the cftc taking action to block events from being listed that seem to fall into these categories? >> well, in our regulated markets, we have not allowed for any war, terrorism and assassination contracts, and we're evaluating. This is why we've put out an advanced notice of proposed rulemaking, and I won't prejudge that, but we're evaluating the the questions as to what the public interest analysis should look like and what sorts of products are not allowed in our markets and which ones are.
▶ 3:47:03So this is certainly something we're considering and we'll continue to consider. And we're optimistic that we'll get some very clear rules of the road for this so that going forward, there's no ambiguity as to what's allowed in our markets. >> all right. And then just one last one. Um you said on the record before that it's vitally important for cftc to look at the courts when it comes to constituting gaming on prediction markets. In more recent statements, uh, it seems to have changed a little bit. And I just want to give you an opportunity to address that. If you had anything to add to that.
▶ 3:47:34>> well, the question of gaming is one that's very complex. So there's various interpretations as to what should constitute gaming, and it's not defined in our statute. So we're evaluating that. And that's why we've put out this advanced notice of proposed rulemaking, so that we get input from the whole community of whether it's the tribes or the the casinos or the prediction markets themselves or other stakeholders to make sure that we get that definition right to the extent that we were to define it under any future rulemaking.
▶ 3:48:02>> I appreciate your time, and I've got no further questions, so I yield back. Thank you chairman. >> gentleman yields back. Now please recognize the gentlelady from maryland, miss mclean delaney for five minutes. >> thank you for being here today. Chairman selig and I represent maryland's sixth congressional district. Uh, and I think I'm the last one on this, so thank you for your, um, you know, your, your willingness to, to be so, um, responsive. Uh, the cftc's work, as you know, is essential.
▶ 3:48:31And marylanders in the sixth district are facing uncertainty from tariffs and volatile markets to more frequent natural disasters. And they do rely on stability in the derivatives market to manage that risk. Um, as the sole regulator overseeing these. And I do hope that there are four more that soon join you there to, to assist with that work. Uh, the cftc is key to keeping supply chains strong. Food security is national security.
▶ 3:48:58And you know, our producers, our farmers need transparent liquid, well regulated markets to manage prices. Um, you also oversee the digital asset blockchain space. And I'm proud that we advance the bipartisan clarity act, including several of my amendments to strengthen consumer protections and agency durability. Um, I encourage you to continue to work with congress to empower the cftc to develop a transparent, principle based framework to oversee crypto markets in the us.
▶ 3:49:27And working with you, congress must establish clear, doable rules for digital assets that foster responsible innovation and also protect our consumers. Right? So to do this, we must move from regulation by enforcement approach at the sec to, as I said, principle based framework that provides market clarity, supports market integrity, and allows responsible actors to operate. And this includes empowering you with appropriate authority over that.
▶ 3:49:54I look forward to this work and this congress and future congresses, but I just wanted to put that out. And in the future of time, I'm submitting some questions for the record on that. Um, moving on. Um, chairman, last year I introduced along with congressman messmer, the bipartisan cftc charitable organization regulation exemption act of 2025. I think he raised it earlier. And I just want to lift up that bill again. I really think it's an incredible one. And many of our churches have reached out to us.
▶ 3:50:23Thank you for your commitment to working with us on this issue and ensuring that charities can responsibly diversify their portfolios and protect their investments from market volatility. Um, and the interest of time. I will also submit some questions on that, but really work on that because it's really important. Um, and last I'm going to talk about energy and long term durability. Um, as many of my colleagues have said, the energy futures market has experienced significant shocks over the past few weeks.
▶ 3:50:51The volatility has real consequences for farmers for families. Um, and these markets rely on trust and transparency. Your responsibility is to protect and prevent these destabilizing conditions and to root out fraud and abuse. Um, and the president's budget does though, include significant increases in its budget. And I assume that these resources will be tagged for part of that.
▶ 3:51:14Um, uh, you know, building on some of venkman's questions because I want to get to it, uh, about the special oil trading, um, futures that were aligned with major developments in the iranian conflict. And most notably, roughly 500 million in oil futures were traded just hours before the strikes on iranian energy infrastructure on march 23rd. And this really raises questions about market integrity.
▶ 3:51:42And you spoke to zero tolerance on, you know, this type of, um, this type of trading. I'm concerned about how the cftc can maintain this long term stability with global shocks and then also deal with this. So my question is, how would the administration's additional resources help the cftc maintain durable predictability and capacity in our energy markets, but also just turmoil and rein in corruption? And you said something about ai. I'm going to add about that.
▶ 3:52:11Um, given your focus on ai, um, and using it for additional efficiencies, will you be using ai tools, uh, with appropriate human oversight to correct abuses? Or are there other tools or policies that we could help you with really important? >> well, on your first question related to enforcement, we are building out even more comprehensive and strong safeguards around surveillance.
▶ 3:52:37So that is going to allow us to catch bad actors in the act and make sure that our enforcement staff are able to then prosecute the cases with the best information and the best data on what's occurring in our markets. So that's a key priority. And we're bringing on some new talent to help build out those systems. But we've got really strong systems in place as it is. But of course, you can always tweak those with new technologies and new opportunities.
▶ 3:53:01Uh, in terms of third party software systems, in terms of ai, we're starting with some of the, you know, uh, microsoft 365 products that I mentioned that will allow our staff to start incorporating ai into their workflows. And this is going to make them more productive so that they can, of course, focus on their day to day tasks and also manage things using automation and software tools. So, so that's a key priority of ours, expanding the use of ai throughout the building.
▶ 3:53:30And there are also software systems and tools that can allow us to pick things up faster. Um, whether it's surveillance or otherwise using ai. >> gentlemen. >> thank you. I yield back. >> jolie's time has expired. Now, recognize congresswoman brown from state of ohio. >> I think I am actually the last person, so thank you. Uh. >> you are. >> thank you. Chairman thompson. Uh, chairman, thank you for being here today. The cftc's last reauthorization expired in 2013.
▶ 3:53:59Since then, we have seen the responsibility of the agency expand without any additional resources or authorities in order to respond to them. These are serious concerns that need to be addressed as the commission absorbs, and congress gives it a larger regulatory role. So let's be clear I support innovation. However, I am deeply concerned about current and growing gaps in the existing regulatory regime and the lack of investigation from the cftc into unethical behavior.
▶ 3:54:27Public reporting has described highly suspicious, well timed trading ahead of the us iran ceasefire announcement, reuters also reported. The white house warned staff not to use their positions to place market bets amid concerns about insider trading and suspicious trading around iran related events. This raises serious questions around public trust and corruption risk when markets are tied to government actions, political outcomes, diplomacy and official decisions.
▶ 3:54:57So my concern is simple. As the cftc takes on more responsibility, congress needs confidence that the agency has the resources, the staffing, the legal clarity and the enforcement posture to adequately regulate these markets, allow innovation to advance and protect consumers.
▶ 3:55:18So, chairman, given the commission's vacancies expired, reauthorizations current staffing constraints and growing workload, do you believe the cftc today has the staff, technology and enforcement capacity to effectively oversee not only the traditional derivatives markets, but also digital assets and rapidly expanding prediction markets? >> congressman, we're running more efficiently and effectively than ever before thanks to right sizing things within the building.
▶ 3:55:48And this is all thanks to the president's leadership. We are a cop on the beat. We're policing fraud manipulation and insider trading. And I think your allegations to the contrary are completely unfounded. >> well that's interesting. What more do you all need from congress in order to ensure that you have an agency that is well resourced enough to respond to the market innovation that we have seen explode in the last few years? >> congresswoman, we are adequately staffed right now.
▶ 3:56:17We're continuing to bring on new staff, and the resumes speak for themselves. As I've said, we've brought on real experts from the outside of, you know, private sector expertise, and we're functioning better than ever. It's really critical that we continue to bring on new software systems like ai tools and surveillance tools to make sure that we're better suited to police the markets, but we're running very effectively and efficiently.
▶ 3:56:42And I think a lot of this fake news out there about us being under resources is incorrect. We have a very well resourced building and we'll continue to fulfill our mission. >> just a point of clarification. So you said you're adequate, adequately staffed, and you're bringing on more staff. So which one is it, congresswoman? >> we are bringing on additional talent where it can be helpful to fulfill our mission, but we have the staff and resources to make sure that we're carrying out our mandate as an agency.
▶ 3:57:13>> so you do. By your own admission, think that you need more staff if you're bringing them on. >> congresswoman, there are certain vacancies that we are filling. Um, that does not mean that we don't have the resources and staff to, to fulfill our mission. We can always do more as an agency and we'll continue to make sure that we're setting the gold standard for regulation of our financial markets. But we are on the beat, and we will continue to perform our vital mission. >> and I want you to be clear, I'm not trying to be adversarial.
▶ 3:57:42I want to be helpful to you. So that's why I'm trying to get to the root of the of the issue. If you need more resources, this is the time to let us know. Do you believe that the current guardrails are sufficient to address insider trading? >> congresswoman. And I very much appreciate that, congresswoman. I very much appreciate that. It's very important that we have the resources, as you mentioned, and I do believe that we have the resources we need to continue to carry out our mission. But of course, we're always broadening our abilities to police the markets.
▶ 3:58:12Um, in terms of, uh, sorry, what was your second question? I apologize. >> the guardrails. Do you think you have sufficient guardrails to address insider trading? >> yes. In terms of insider trading, our statutes are very clear. We have very broad authority to police for fraud manipulation and insider trading, and we are building out our surveillance capabilities to be able to more effectively police in these markets.
▶ 3:58:37In terms of the newer markets, like prediction markets, we've entered into a memorandum of understanding with the major league baseball um organization and will continue to enter into agreements with other leagues and participants to ensure that we have all the information we need to adequately police these markets. >> okay. Thank you. This committee has an obligation to ensure that the cftc is fully staffed, fully funded, formally reauthorized and prepared to protect the public from insider trading, corruption and profiteering off the government in action.
▶ 3:59:05And I look forward to working with my colleagues to address these concerns. Thank you for indulging me, Mr. chairman, I yield back. >> julia's time has expired. Um, before we adjourn today, I invite the ranking member to share any closing comments that she may have. >> thank you, Mr. chairman, and thank you, chairman selig, for your participation today.
▶ 3:59:22This committee takes seriously its responsibility to oversee the cftc work, and I believe today's discussion has helped highlight both the challenges and the opportunities facing our agricultural producers, retail investors and the broader markets that they rely on.
▶ 3:59:41As ranking member of the committee, I'm constantly reminded of the vital role our farmers, ranchers and rural communities play in our nation and economy and of the volatility that they have endured since president trump has taken office.
▶ 3:59:56At the very least, they should be able to trust, without a doubt that america's financial system and markets are reliable, stable and impartial, and that the regulators who take enforcement actions are capable and equipped to look out for the american people's financial interests without political interference or favoritism.
▶ 4:00:16Allegations of insider trading on prediction markets are serious concerns, and today's discussion made clear that there are steps the cftc and congress must take to ensure market integrity, protect consumers and meet the needs of businesses that use commodity markets to hedge risks. It also has made clear that we need more than just you at the commission, and I would encourage the administration to nominate and fill these positions and return to a bipartisan organization.
▶ 4:00:44I look forward to continuing this conversation in the coming days and months, and encourage my colleagues on both sides of the aisle to work together to provide the cftc with the funding and resources it needs to do the job that we have set out for it to do. Thank you, Mr. chairman. >> thank you. Ranking member. Uh, chairman, thank you so much for your time, your leadership, your expertise. Uh, much appreciated. I thought it was a very good hearing. We touched on a lot of different issues.
▶ 4:01:15Uh, we look forward to working with you and your team, um, in the critical role that you have. Um, and, and evolving role obviously with digital assets, uh, with, uh, you know, with the rulemaking in terms of the prediction markets and where that, where that may go.
▶ 4:01:36Uh, I appreciate the fact that you're using those listening skills through the rulemaking process to, uh, to make informed decisions. Uh. Uh, the ranking member and I will be, uh, will be sending a letter to the, to the white house, just encourage them to, you know, promptly fill those commissioner positions with qualified individuals, making sure both majority and minority, uh, is, uh, is represented, uh, get you some talented folks there,
▶ 4:02:06Which I know that you'll, uh, work with and deployed to help fulfill the mission. And with that, it, uh, um, we're just really appreciate your time today. Um, and your, your testimony. So under the rules of the committee, the record of today's hearing will remain open for ten calendar days to receive additional material and supplementary written responses from the witnesses to any question posed by a member. This hearing of the committee on agriculture is adjourned.