CFTC Chairman Michael Selig Talks Monitoring Prediction Markets

Michael Selig · U.S. Commodity Futures Trading Commission (CFTC)

CFTC and exchanges will catch manipulation in political prediction-market contracts; risky contracts won't be listed.

Exchanges self-certify event contracts and review them for manipulation risk before listing, and trading volume is one factor in that assessment. Selig says the exchanges are surveilling their markets and will not list a contract that carries manipulation risk. He argues that people on either side of the midterm races could trade to boost the numbers on political contracts, and that the CFTC and exchanges are watching for this. He says the CFTC will investigate and prosecute any manipulation, wash trading or fraud it finds, while declining to comment on specific investigations.

“And the exchanges are doing the same, and [I] can assure you that whether... there's manipulation in the markets or, you know, any other type of nefarious activity, we're gonna catch it.”at 3:32

Michael Selig · U.S. Commodity Futures Trading Commission (CFTC)

Casino-style gambling isn't a CFTC derivative; order-book event contracts need uniform federal market regulation.

The CFTC is finalising a rule that excludes casino-style gambling from its jurisdiction, and it already has one rule finalised. Selig says the CFTC has never regulated casino gambling and never will. He argues casino-style gambling does not fit the statutory definition of a derivative, so it differs from event contracts traded on order books. He would be very concerned if a person could trade on an order book at a casino with no market-based regulation, no protections and nothing uniform across the country. Gensler's past concern about the boundary is, in his view, a bit silly.

“Well, we're gonna finalize the rules to protect the American people... We never have, never will. These types of transactions are very different from what's happening in our markets on order books.”at 4:23

Michael Selig · U.S. Commodity Futures Trading Commission (CFTC)

Failure of the Clarity Act leaves crypto customers unprotected; the CFTC's federal option must be finalised.

Selig says he is very disappointed Congress did not send the Clarity Act to the president. He argues the bill would have guaranteed customer protections in crypto asset trading and required exchanges to register with the CFTC. He cites the CFTC's longstanding rules, which date to the 1920s Grain Futures Act and have been enforced for fifty years. Because Congress cannot require every exchange to register, the CFTC's proposals create a federal option instead. He wants to finalise that option quickly because the agency cannot allow another FTX-style scam to undermine the markets.

“I'm very disappointed that congress failed to send the clarity act to the president's desk. That legislation would have guaranteed to the American people that we have customer protections when it comes to crypto asset trading...”at 6:15

Michael Selig · U.S. Commodity Futures Trading Commission (CFTC)

US needs AI compute futures so data-center and superintelligence firms can hedge, but the CFTC will move slowly.

Selig says it is critically important for the US to host data centers and superintelligence businesses if it wants to be the centre of the new technology ecosystem. He argues those firms need markets where they can hedge, purchase and offset risk, so the CFTC will launch these markets in the US and set the gold standard. He is not rushing, and he has not rushed any new product. The comment period runs to November 9 after an extension. Many comments do not oppose the markets but flag opacity in the inputs to the index products that would trade on them, which the agency must resolve before finalising.

“I think it's critically important that we're gonna have data centers and super intelligence businesses here in The United States... we've gotta have markets where the firms can come in and hedge and purchase and offset risks.”at 7:19