HOUSE AGRICULTURE COMMITTEE HEARING
Overview
For questions on the note below, please contact the Delta Strategy Group team.
On March 25, the House Agriculture Committee held a hearing entitled “The CFTC at 50: Examining the Past and Future of Commodity Markets.” Witnesses in the hearing were:
- Charlie Carey, Chairman, Commodity Markets Council
- Dr. Richard Sandor, Chairman and CEO, Environmental Financial Products, LLC, Aaron Director Lecturer in Law & Economics, University of Chicago Law School
- Dave Schryver, President and CEO, The American Public Gas Association
- De’Ana Dow, Partner and General Counsel, Capitol Counsel, LLC
- Thomas Sexton, President and CEO, National Futures Association
- Christopher Giancarlo, Former Chairman, Commodity Futures Trading Commission
Attached is a summary of the hearing prepared by Delta Strategy Group, which includes several high-level takeaways, followed by summaries of opening statements.
Key Takeaways
The following is a summary of the main topics explored in the hearing, with further details in the Discussion section below.
- Chairman Thompson (R-PA) and witnesses affirmed that the CFTC is effectively fulfilling its statutory mandate while adapting to market and technological innovations. Witnesses agreed that the CFTC’s implementation of Dodd-Frank rules set a global standard for increasing transparency and reducing systemic risk.
- Chairman Thompson (R-PA), Carey, and Schryver emphasized the importance of maintaining a principles-based regulatory approach to ensure flexibility and innovation while safeguarding market integrity. Dow highlighted the Commodity Futures Modernization Act (CFMA) as essential for fostering innovation and growth but stressed the need for continual adaptation to maintain market efficiency and financial stability.
- Republicans emphasized that derivative markets are crucial for producers to manage risk, stabilize prices, and predict costs to the benefit of consumers, cautioning against overburdening derivative transactions with excessive capital requirements. Carey discussed how the CFTC regulates products that producers and market participants need to make their operational decisions and to hedge their financial risks.
- Giancarlo discussed the importance of establishing clear rules of the road for the digital asset space to support growth, innovation, and onshore development within the U.S. He stressed that the U.S. needs a regulator for crypto spot markets, and that the CFTC is the only agency ready for that responsibility.
- Representative Salinas (D-OR) questioned whether event contracts on global conflicts differ from sports betting as she raised concerns about whether they predict or drive outcomes. In response, Giancarlo argued that contract markets are driven by market participants and have become international, reflecting societal sentiment and often outperforming polling in predicting outcomes. He explained that since elections impact geopolitical factors, allowing people to hedge their stakes is reasonable and necessitates the establishment for proper regulation for event contracts.
Opening Statements and Testimony
Chairman G.T. Thompson (R-PA)
Well-regulated derivatives markets have been an anchor of stability during periods of tremendous change. Section III of the Commodity Exchange Act (CEA) lays out an ambitious agenda to protect market participants and ensure resilient, fair, and dynamic American markets. Congress established the principle that industry participants are partners in regulation, with both rights and duties under the Act; this is an extraordinary feature of our regulatory system. By holding regulated parties accountable to outcomes and not just compliance checklists, Congress sought to expand the responsibility for promoting market integrity. It lays out the principles of market integrity and customer protection that are the bedrock of its work and essential to a healthy functioning marketplace. Congress unambiguously set out the expectation that new ideas, new products, and new services should be welcomed across derivatives markets.
Ranking Member Angie Craig (D-MN)
Bipartisanship has been traditionally extended to the Committee’s work and oversight of derivatives markets and the CFTC, whether it was the 2008 CFTC Reauthorization or the crafting of the derivatives title of the Dodd-Frank Act for a well-regulated financial system. The CFTC needs sufficient resources otherwise its ability to ensure the integrity of the more traditional commodity markets for risk management purposes will be diminished. The House recognized that the CFTC would need additional resources to implement new requirements and provisions in FIT21. The funding provided was a good first step, but if we are going to hand the agency new responsibilities, we need to find a more permanent solution to the CFTC’s funding needs. We need to work across the aisle to develop a meaningful, durable plan that provides the CFTC with the resources that will allow it to bring its strong history of regulatory achievement to new markets, including digital assets like crypto. If these markets ever stop providing utility to these end-users, then they will have truly become the gambling halls they are often accused of being.
Charlie Carey, Chairman, Commodity Markets Council
Derivatives markets provide price discovery and risk management to our economy. The CFTC has direct oversight of that function as well as the exchanges, clearinghouses, and intermediaries in US markets. U.S. markets need clear, transparent, tough, and flexible regulation. Global liquidity can move offshore, and it will always be to our advantage for global benchmarks to be subject to U.S. oversight and priced in U.S. dollars. The system of exchanges, clearinghouses, and intermediaries was resilient in 2008, leading Congress to use CFTC regulation as a framework for previously unregulated swaps markets. The CFTC has a history of vetting new, innovative products, including weather futures, interest rate, event contracts, and digital assets. When Congress passed CFMA, it transformed a prescriptive regime into a principles-based model, allowing market participants flexibility in how met requirements, which in turn spurred American innovation. The principles-based regime also allowed exchanges to self-certify products, something that has led to continued innovation. CMC end user members depend on risk-management markets to allow farmers to lock in a price on their commodities and attain critical financing as they manage and mitigate risk. Derivatives markets provide price discovery and risk management to the industry that supplies these goods to us.
Dr. Richard Sandor, Chairman and CEO, Environmental Financial Products, LLC, Aaron Director Lecturer in Law & Economics, University of Chicago Law School
One of the biggest challenges in creating the CEA was securing exclusive jurisdiction, which was achieved by collaborating to prevent regulatory fragmentation among banking, securities, and other agencies. Ginnie Mae mortgage-backed securities were followed by long-term Treasury bond futures after the Treasury lifted the ceiling on long bonds and began regular issuance, and later by ten-year Treasury futures, initiated due to the Treasury’s consistent issuance of ten-year securities. Contrary to concerns in the 1980s about market distortion, options proved successful, allowing farmers to use puts rather than futures and providing grain merchandisers with valuable tools. Last year, we issued $5 trillion in securities, with interest costs now being the single largest factor. I estimate that the introduction and widespread use of interest rate futures have saved at least $5 to $10 billion in interest expenses, while also helping benchmark the ten-year Treasury internationally for sovereign debt. Countless innovative products are yet to be developed, and continued commitment from this Committee will make that possible.
Dave Schryver, President and CEO, The American Public Gas Association
Derivatives are used as a risk management tool by engaging in over-the-counter swaps and futures contracts to lock in prices, minimizing the impact of sudden price spikes due to extreme weather or other disruptions. Without these hedging tools, consumers would face greater price volatility and unpredictable energy costs. Under strong CFTC oversight, markets function properly, and prices remain stable, which reflects real supply and demand conditions. The CFTC’s oversight ensures fair market access, allowing entities to plan responsibly and maintain affordable prices for consumers. This oversight is crucial in preventing market abuses that can distort prices, such as manipulation by large financial entities that ultimately increase costs for end users. APGA supports market transparency to limit excessive speculation and ensure the CFTC has the necessary resources to protect consumers. Strong CFTC oversight, including position limits, trade monitoring, and adequate enforcement, is essential for fair markets and preventing harmful price swings. Transparency reduces manipulation risks, builds confidence, and benefits not just public gas utilities but the broader economy.
De’Ana Dow, Partner and General Counsel, Capitol Counsel, LLC
CFMA brought the most substantial revisions to the CEA since the creation of the CFTC, fundamentally restructuring the regulation of exchange-traded derivatives and introducing principles-based regulation, replacing prescriptive rules with flexible core principles that promoted innovation, competition, and deeper, more liquid markets for hedging and price basing by commercial end users. It addressed legal certainty and ensured the enforceability of over-the-counter swaps, transformed the CFTC’s role in overseeing futures markets, lifted the ban on single stock futures and narrow-based stock indices, established direct regulation of derivatives clearinghouses, and added new product-based exclusions and exemptions. It fostered innovation and expanded the use of electronic trading platforms, moving away from trading floors dominated by hand signals, handwritten order tickets, and trading cards with timestamps. CFMA’s flexible regulatory approach ensured that futures markets continued to perform well amid crises triggered by geopolitical events, terrorist attacks, a pandemic, and severe financial shocks. The CFTC has remained resilient, maintaining robust oversight, protecting customers, and enforcing anti-fraud and anti-manipulation regulations while adapting to evolving markets. CFMA played a critical role in fostering innovation and growth, but it is essential to continue adapting regulations to maintain market efficiency and financial stability.
Thomas Sexton, President and CEO, National Futures Association (NFA)
NFA is the independent self-regulatory organization (SRO) for the derivatives industry, registered as a futures association (RFA) under Section XVII of the CEA. As a regulatory body, it does not operate as a market or act as an industry trade association. As the CFTC’s scope and responsibilities expanded, Congress and the CFTC entrusted NFA with additional oversight duties. NFA performs seven primary functions: registration, rulemaking, member monitoring, enforcement, market regulation, investor protection and education, and dispute resolution. These functions allow the CFTC to allocate resources effectively while maintaining oversight of NFA’s activities. NFA and the CFTC have worked together effectively to detect and combat fraud, particularly addressing customer protection abuses, such as the misappropriation of segregated funds. They have also collaborated on developing innovative regulatory programs, including oversight of swap dealers post-Dodd-Frank and activities involving spot digital asset commodities. NFA believes Congress should reauthorize the CFTC and supports its potential expansion to oversee the spot digital asset commodity market. The long-standing partnership has proven to be a resilient and effective framework, combining self-regulation with federal oversight to ensure market integrity and protect stakeholders.
Christopher Giancarlo, Former Chairman, Commodity Futures Trading Commission
CFTC markets for risk transfer are fundamentally different from SEC markets for capital formation, requiring specialized regulatory skills that the CFTC and its staff possess in abundance. Well-regulated markets are crucial for managing risks associated with the U.S. dollar, helping ensure its role as the world’s reserve currency. The U.S. is the only major economy with a dedicated regulatory agency for derivative markets, and it is worth considering whether that distinction is why U.S. commodity and derivative markets are so dominant and important on the global stage, or whether their size necessitates a dedicated regulator. The CFTC’s clear, transparent, tough-but-flexible rules support agricultural production, foster economic growth by driving down homeownership costs, and protect consumers from abuse, with critical unique principles-based self-certification framework and self-regulation.
Discussion
Chairman Thompson (R-PA): Has the CFTC’s implementation of the CFMA as principles-based regulation worked as intended by promoting responsible innovation and fair competition while protecting consumers and market integrity? Dow: CFMA’s core principle-based regulation has worked as or better than intended by giving exchanges flexibility to respond to market demands while ensuring compliance with the CEA. Despite concerns about the permissionless approach, the system has proven effective without significant problems. The CFTC retains authority to stay rules if non-compliant or inadequately explained, balancing oversight with innovation.
Chairman Thompson (R-PA): What specific skills and understandings are needed to effectively regulate the risk transfer market that other financial regulators might lack? Giancarlo: The ability to regulate complex markets, each with distinct participants, dynamics, and seasonality, requires specialized skills that take decades to develop. These specialized capabilities are uniquely developed at the CFTC and its markets. With the support of this Committee, the CFTC’s existing expertise can be powered by cutting-edge data analytics, positioning the agency effectively for the future.
Chairman Thompson (R-PA): How do the Treasury futures products specifically help the U.S. government save between $5 to $10 billion annually in interest costs? Sandor: These markets offer hedging capabilities and enable the sale of debt for dealers and U.S. government securities. Dealers can bid for those bonds at a higher price and a lower interest rate because they can hedge the risks involved. The liquidity in the futures market is so broad that it can absorb that level of hedging, thereby reducing interest costs for the U.S. government.
Ranking Member Craig (D-MN): How many of your members are conducting digital asset spot market trading, hence these extra protections such as compliance rule 2-51? Does NFA receive customer complaints from those who are trading in these spot markets with entities who are not NFA members, and if so, what do you tell them? Sexton: Rule 2-51 was adopted because traditional compliance rules applied only to futures contracts, leaving us unable to discipline member firms engaged in fraudulent activities involving spot digital asset commodities, as these fell outside our jurisdiction. This rule addressed that gap and was crucial for regulatory oversight. We have approximately one hundred members involved in spot digital asset activities, primarily through self-reporting within commodity pools that invest in futures, securities, or digital assets. We have received minimal customer complaints and have not brought any disciplinary cases under Rule 2-51. If complaints involve firms outside our membership, we closely coordinate with and refer to the CFTC’s Division of Enforcement (DOE).
Representative Lucas (R-OK): How should incoming Chairman Quintenz collaborate with the legislative bodies and prudential regulators to ensure affordable and fair derivatives markets, especially considering how prior proposals, such as the Basel III endgame proposal, have been particularly burdensome and disproportionately harmful to end users? Carey: One of the CFTC’s biggest strengths is conducting a dialogue where every concern is addressed, using judgment to determine when certain rules should be applied. The goal is to ensure safety and soundness in the system, with enough capital to protect customers, without making it so prohibitive that businesses cannot operate on these exchanges. You do not want it to reach a point where it is better for them to go unhedged rather than hedged.
Representative Lucas (R-OK): How can the CFTC and SEC collaborate to alleviate stresses on the Treasury market, particularly considering the upcoming clearing rule? Sandor: The interest rate market is a very small part of the SEC, as they handle equities, not fixed income, and government securities are totally exempt. We need to encourage more primary dealers and simplify rules because it is competition at auctions that keeps bond prices high and interest rates lower. Technologies like blockchain that are routinely used by industry today, must be integrated into the regulatory process in a timely manner.
Representative Scott (D-GA): What impacts do transparency requirements have in protecting consumers from risk? Schryver: We recognize the role of speculation in providing liquidity, but transparency is critical. Our members have much more confidence in the marketplace due to the actions taken by the Committee and Congress through Dodd-Frank to enhance market transparency.
Representative Scott (D-GA): What more should we be doing here in Congress to emphasize the importance of the CFTC and secure necessary funding increases? Dow: Congress must recognize that the CFTC’s jurisdiction has grown substantially, and its current budget is insufficient to meet these expanded obligations; Giancarlo: If this Committee decides to grant the CFTC greater jurisdiction over spot digital commodities as proposed in FIT21. Funding that new responsibility is critically important.
Representative Scott (R-GA): What would be the consequences if the U.S. dollar were to lose its status as the world’s reserve currency? Giancarlo: The founding of the CFTC aligns with the dollar going off the gold standard in the mid-1970s. The creation of financial futures provided markets with a way to hedge risks, supporting the dollar in its fiat form. The CFTC safeguards the dollar’s global acceptance, maintaining its critical role as the world’s reserve currency, which in turn enables the U.S. to finance its substantial debt. The CFTC plays a crucial yet understated role, arguably achieving even better than a twenty-to-one benefit ratio, by effectively standing between the dollar’s continued status as the reserve currency and its potential loss; Sandor: There will be a significant increase in interest rates if we lose our role as the reserve currency, driving up every type of consumer expenditure.
Representative Scott (R-GA): Why is CFTC’s framework the most effective approach for regulating digital currencies? How did the CFTC protect DCM and DCO participants from losses during the FTX failure? Giancarlo: The CFTC has been looking at digital assets since at least 2014, declaring Bitcoin in 2015 as the first digital commodity under its jurisdiction. Over the past decade, while the SEC has resisted engaging digital assets, the CFTC has significantly increased its involvement and built unmatched expertise in digital commodities, especially Bitcoin and Ethereum. Its self-certification process and principles-based regulation uniquely position it to regulate these rapidly evolving instruments. The CFTC now oversees a deep, liquid, transparent, and well-regulated market, largely free of fraud and manipulation compared to spot markets. In the global FTX collapse, only the operations supervised by Japanese regulators and the CFTC survived intact, because both required segregation of customer funds.
Representative Adams (D-NC): Why do you support speculative position limits, and how do they contribute to fairness and confidence in derivative markets for commercial and end users? Schryver: Our members are market takers, not market makers. There is integrity in the market, and position limits help ensure that no one party has a substantial share of the market that would allow excessive speculation to change the price beyond normal market factors.
Representative Adams (D-NC): How can we strengthen derivatives markets’ resilience to volatility and uncertainty, and ensure the effectiveness of commodity markets and derivatives products as tools for risk management and price discovery? Carey: Markets, along with the liquidity within them, help reduce the amount of volatility. There is still price risk, but these markets allow users to transfer that risk to someone willing to accept it. The CFTC has proven itself as the regulator of choice because these markets work, protecting customers and maintaining marketplace integrity through continuous evolution to meet market needs. The CFTC is one of the places Congress should look to ensure that our markets continue to be our economic engine. With global competition, especially from Brazil which is growing rapidly and denominates crops in U.S. dollars while benefiting from our strong currency, the role of the CFTC and exchanges remains critical. They provide integrated products tied to insurance, helping farmers make informed decisions. Open and transparent markets are the key.
Representative Johnson (R-SD): Why was it important for the CFTC to oversee the new authorities and responsibilities over the swaps market under Dodd-Frank, and why was the CFTC the right agency for this role? Giancarlo: Title VII of Dodd-Frank, which granted the CFTC oversight over most of the U.S. swaps market, focusing on regulated swaps clearing, swaps reporting, and swaps execution. I strongly supported Dodd-Frank’s clearing mandate. Swaps reporting also made sense, though reporting to repositories felt more 20th-century; blockchain offers the real-time transparency regulators need. The 2008 crisis stemmed from misunderstanding swap exposures, and had we known, the crisis might have been avoided. Congress was right to allow swaps execution via any means of interstate commerce, recognizing swaps’ episodic liquidity. The CFTC eliminates emotion and partisanship from market management. No clearinghouse under CFTC supervision has ever failed, despite overseeing some of the largest and most complex global markets.
Representative Johnson (R-SD): Do you have any observations or insights on the FIT21 bipartisan market structure bill? Giancarlo: The U.S. needs a regulator for crypto spot markets, and the CFTC is the only agency ready for that responsibility today. Under both Republican and Democratic leadership, the CFTC has consistently engaged with crypto, overseeing Bitcoin, Ethereum, and recently Solana futures, as they maintain orderly and transparent markets. The SEC’s notable lack of engagement underscores the CFTC’s proven track record. The U.S. must lead this innovation, and the CFTC is uniquely positioned to do so.
Representative Salinas (D-OR): From a Kalshi or Polymarket users’ perspective, is an event contract on the conclusion of a war different from betting on the outcome of a basketball game? What is your analysis of the incentive structures that are created by allowing event contracts on such high stake electoral and global affairs? Are they predicting or driving the outcomes? Giancarlo: Contract markets are uniquely driven by market participants and have become international. When approximately seventy percent of democracies voted in 2024, event-contract platforms like Kalshi and Polymarket were notably more accurate than traditional polling in predicting outcomes. These markets reflect societal sentiment weeks in advance and outperform polling. It makes sense to allow people to hedge their stakes since elections impact trade, policy, immigration, and other critical areas. The same argument of these contracts driving outcomes can be said for polling. The time has come to establish proper regulation for event contracts as well.
Representative Budzinski (D-IL): What are the potential consequences to U.S.’s farmers if key agricultural benchmarks are set outside the U.S. and in a currency other than the U.S. dollar? Carey: The value of having the dollar as the reserve currency is a powerful tool, not just for farmers, although farmers’ prices are denominated in dollars and regulated in the U.S. through rules established by this Committee, the CFTC, and exchanges. Together, these institutions ensure transparency. If these markets moved to China, Europe, or Brazil, they would function very differently and make us second-class participants. Although Brazil’s agricultural production growth has significantly outpaced ours, global benchmarks remain in the U.S. because of our rule of law, the treatment of customer funds, openness, transparency, and a regulatory environment that protects and supports producers, end-users, and customers.
Representative Baird (R-IN): What is the purpose in differentiating between agricultural commodities, energy and precious metals, and financial commodities led to more effective market oversight by the Commission, benefiting both our markets and end users? Dow: The core principles flowed directly from the nature of those commodities. Energy and agricultural commodities were subject to position limits, with exemptions for hedging, whereas financial commodities were not, due to their lack of finite supply. Physical commodities raised additional concerns regarding deliverable supply and market manipulation. The rules effectively adapted to each commodity class, providing focused regulation tailored to their needs, an approach that has proven successful and continues to work well.
Representative Baird (R-IN): How has the CFTC’s sole focus on derivatives markets, compared to other financial regulators abroad, contributed to the Commission’s success and the success of our markets here in the U.S.? Dow: The Commission was first in recognizing comparable regulatory regimes worldwide, enabling market access for domestic and foreign participants through comparability determinations and home-based oversight, significantly enhancing the CFTC’s global visibility. Following the 2008 financial crisis, the CFTC’s implementation of Dodd-Frank rules set a global standard. It leads within IOSCO, collaborates with international regulators to align global standards, and works closely with the Financial Stability Board (FSB) to harmonize regulations. Its approach is a global model, and the U.S. remains the only country whose regulator has exclusive jurisdiction over futures trading and markets; Giancarlo: Not only does the U.S. have a regulator solely devoted to derivatives, but it also has some of the world’s largest, most sophisticated, and most important derivative markets. This raises a chicken-and-egg question: is it because we have this singular regulator that we have grown the most important futures markets, or is it because we have these significant markets that we require a specialized regulator? I think it is a little bit of both.
Representative Vindman (D-VA): What has been the impact of the current Administration’s tariffs, particularly on key inputs that drive the American agricultural industry, on commodity markets and your organization’s stakeholders? What are the long-term impacts, and how do you anticipate these tariffs will affect your stakeholders and prices for everyday consumers? Carey: The tariffs reciprocated by the Chinese changed the amount of agricultural goods we sold to China from the U.S., leading them to seek supplies elsewhere. If these tariffs remain in place, the long-term impacts will likely center around commodity prices, as futures markets and related businesses are highly competitive; Sexton: We are a regulator, and our biggest concern is protecting customers during periods of volatility. We are carefully monitoring our member firms to assess the risks they present, especially given the current market volatility.
Representative Hayes (D-CT): What are your thoughts on merging the SEC and CFTC? Giancarlo: The estimated savings are $9 million. Even with inflation, if that is $12 or $13 million today. The savings would not be worth what would be sacrificed in losing the independent oversight that the CFTC brings to these markets.
Representative Mann (R-KS): What is your enforcement and disciplinary process, and how do you coordinate and work with the CFTC on enforcement? Sexton: Our philosophy is to work with our member firms to help them understand industry and NFA rules through examinations. When issues arise, enforcement becomes necessary, especially for repeat offenders or significant problems. We bring approximately fifteen enforcement actions each year. We work closely with the CFTC on enforcement matters, holding quarterly meetings with their DOE to coordinate investigations and avoid duplication. While serious fraud cases may require some overlap, we strive to minimize it, with SROs often playing a critical role; Giancarlo: NFA is funded by the industry, while the CFTC is funded by taxpayers. It is in consumers’ interest for self-regulators like the NFA to shoulder a significant portion of the regulatory burden. NFA is often closer to the action and its members, with a strong sense of what is happening and who the bad actors are.
Representative Mann (R-KS): What did you mean by “one cannot serve two masters” in the context of exclusive jurisdiction, and why does this matter to markets? Sandor: If we have multiple regulations, it imposes costs on those being regulated, and these regulations may have contradictory purposes. If one is promoting leverage while another seeks to reduce, it creates counteracting forces. Specialization and focus have enormous benefits, as seen in the investment banking world and even the legal profession, enhancing market efficiency and benefiting consumers.
Representative Figures (D-AL): How and where is the CFTC supporting innovation? Dow: Adopting the core principles’ flexible approach to regulation was important because it allowed reasonable discretion on the exchanges’ part, rather than requiring strict adherence to the CFTC’s interpretation. This placed the onus on exchanges to demonstrate how their products or rules met the Act’s requirements, encouraging thought, creativity, and advocacy. It significantly reduced the burden of prescriptive rules that delayed market entry and required extensive review and amendments. By enabling multiple ways to meet requirements, this approach fostered market growth, innovation, competitiveness, and improved access for end users who rely on markets for hedging and pricing; Carey: CFMA allowed for greater competition and innovation, as you mentioned. The key benefit was the ability to bring products to market much faster with the cooperation of the CFTC, providing greater flexibility and better alternatives for both end users and the exchanges offering these products; Sandor: Many trading products have failed before succeeding, driven by continuous experimentation. Back in 1972, the markets were 99 percent agricultural products, with no financial or energy contracts. Today, those products make up a small fraction of the business. The industry’s growth rate has been comparable to that of the technology sector, around fifteen to twenty percent per year for the last fifty years, driven by the richness of new products.
Representative Feenstra (R-IA): Can you provide an update on voluntary carbon markets as a form of added value for producers and explain the CFTC’s role in protecting farmers and landowners from manipulation and fraud in these carbon credit markets? Giancarlo: I supported work on those markets as part of the CFTC being at the forefront of innovation. While I have not closely followed recent regulations and guidance, I know it is essential to ensure these markets have proper regulation; Sandor: Our farmers could provide all the credits necessary to reduce emissions, creating a whole new product line for American agriculture. Exchanges could design products around this, including futures contracts that guarantee net farm income by enabling farmers to offer two services: one above the ground and one below the ground, specifically carbon sequestration as new revenue stream. Exchanges have the capability to develop products around it. Beyond innovations, there is potential to design futures contracts around these opportunities as well; Carey: We must stay at the forefront in creating products and bringing products to the marketplace, in addition to having a well-run and well-regulated exchange.
Representative Moore (R-AL): How are our regulations flexible and tough at the same time, and why is that important? Carey: We strive to ensure marketplace integrity through the rules we provide. Flexibility comes from maintaining open dialogue, allowing the marketplace to innovate appropriately. Standards apply consistently, whether related to capital, trade practices, anti-fraud, or anti-manipulation rulings. Flexibility means understanding who is using the markets and how they should be treated; Dow: There is some inconsistency between being tough and flexible. Although these core principles are flexible, they are still rules that must be followed. The CFTC is tough in ensuring compliance through rule enforcement reviews, where it visits exchanges to verify that they are enforcing their rules. The enforcement mechanism itself is very strong; Giancarlo: I do not think it is an incompatible combination. In overseeing an important market, tough and flexible is the right approach. What we do not want is tough and inflexible, which we have seen at times. Tough and flexible is the correct combination for a regulatory body, and it is the approach that the CFTC has long championed.
Representative Messmer (R-IN): What are your concerns regarding digital asset markets if Congress fails to protect the industry from regulatory slowdowns and lengthy non-disciplinary litigation? Sexton: FIT21 addressed many customer protections long established in the regulated derivatives market, including customer asset protection, risk disclosures, capital requirements, and antifraud measures. If we are to build a model for centralized digital asset marketplaces, we must address these customer protection concerns. Many of the protections in FIT21 should be incorporated into any new legislation.
Representative Rose (R-TN): How does the CFTC’s ability to detect and deter market distortions lead to more stable prices for consumers? Schryver: The CFTC is that strong cop, especially with the reforms that came out of Dodd-Frank. It helps them make the best decisions they can to protect. consumers from price volatility by using the tools that market affords.
Representative Rose (R-TN): Has the CFTC sufficiently addressed the systemic risk that cybersecurity threats pose to our derivatives markets? Does the CFTC have adequate resources to provide this protection? Dow: The Commission regularly engages with international regulators and industry to ensure they are prepared for any cyber risk; Giancarlo: We have always been subject to attacks to federal systems and need to use Presidential powers to prevent these attacks, particularly from non-state actors. It is time we go from defense to offense. No one can compete with our ability to innovate, and we cannot lose that edge.
Representative Nunn (R-IA): What can the CFTC do to help provide clarity on assets like ether or others that operate more like a commodity? Giancarlo: The CFTC has been crystal clear on this for nearly a decade, declaring Bitcoin in 2015 as the world’s first digital commodity under its jurisdiction. We greenlighted the first regulated crypto derivatives market with Bitcoin futures and marketplace is deep, liquid, transparent, and extremely well-regulated. Despite efforts to sideline the CFTC, it remains globally recognized as the primary crypto regulator with a proven track record. This is another opportunity to lead by establishing a regulatory framework for new instruments. The days of not fighting back against illicit activity with existing tools must end.