HOUSE COMMITTEE ON AGRICULTURE
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On April 16, the House Committee on Agriculture held a hearing, “For the Purpose of Receiving Testimony from the Honorable Michael Selig, Chairman, U.S. Commodity Futures Trading Commission.” The witness in the hearing was Commodity Futures Trading Commission (CFTC) Chairman Michael Selig.
Below is a summary of the hearing prepared by Delta Strategy Group, which includes several high-level takeaways, followed by summaries of opening statements and discussion.
Key Takeaways
- Chairman Thompson (R-PA) discussed prediction markets, noting that, unlike digital asset spot markets, event contracts are already within the Commission’s jurisdiction, and asked Chairman Selig to clarify the agency’s authorities. Chairman Selig outlined the CFTC’s broad, exclusive jurisdiction over commodity derivatives under the Commodity Exchange Act (CEA), noting the broad definitions of commodity and swap, and stated the agency is actively defending that authority.
- Multiple Republican members, led by Representatives Thompson, Johnson (R-SD), and Moore (R-AL), discussed the urgency of passing the Digital Asset Market Clarity (CLARITY) Act, highlighting the CFTC’s role as the appropriate primary regulator of digital commodities and raising concerns that further delay puts investors and consumers at risk.
- Chairman Selig expressed strong support for market structure legislation, citing the collapse of FTX as a cautionary example. He highlighted steps taken in the interim, including joint SEC and CFTC interpretation clarifying commodity versus security classifications, tokenized collateral relief, stablecoin capital treatment, and Howey test guidance. He framed these steps as critical but emphasized that legislation is needed to lock them in for the long term and discussed the need for a future-proof regulatory scheme that accommodates on-chain software systems without discouraging innovation.
- Chairman Selig stated that 24/7 trading is not one size fits all and that the agency must evaluate each product and market individually before rolling it out broadly. On decentralized exchanges and perpetuals, he stated the agency’s goal is to onshore these markets and bring them under comprehensive CFTC regulation.
- Chairman Selig consistently emphasized the CFTC’s zero-tolerance policy on fraud, manipulation, and insider trading, and outlined the two-tier regulatory structure in which exchanges serve as the first line of defense with the CFTC as the second line. Chairman Selig highlighted that the Commission has issued an advanced notice of proposed rulemaking (ANPRM) on prediction markets, soliciting broad stakeholder input on standards, guidelines, and potential new regulations before the agency moves forward with any formal rulemaking. He declined to prejudge the rulemaking process regarding which categories of contracts should be off-limits.
- Multiple Democratic members raised concerns about insider trading, national security risks, tribal sovereignty, and the appropriate scope of CFTC jurisdiction over prediction markets.
- Representative Davis (D-NC) discussed the importance of the SEC and CFTC memorandum of understanding (MOU) in reducing fragmentation and improving coordination on digital assets, noting the risk of inconsistent rules across blockchain networks that span both securities and commodities.
- Ranking Member Craig (D-MN), along with multiple Democratic members, raised concerns over staffing levels and the agency’s capacity to fulfill its expanding mandate.
SUMMARY
Opening Statements and Testimony
Committee Chairman “GT” Thompson (R-PA)
The Commission has many new questions to grapple with, including the integration of digital assets and blockchains, increasing participation of retail customers, the growing prevalence of integrated business models, and harmonization of rules between financial regulators. While the rise of prediction markets has created an innovative new class of financial derivatives, it has also spawned significant confusion and debate about the role and authority of the Commission. The definitions of commodity and swap are sweeping, and the Commission’s authority over transactions on registered exchanges is complete and exclusive. Understanding the Commission’s jurisdiction is not the end of the public policy questions that we must consider. Many Members have raised important questions about the rules for trading event contracts and the appropriateness of certain contracts being listed for public trading. The Commission has significant tools currently at its disposal to address many of these concerns. 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 appropriate.
Ranking Member Angie Craig (D-MN)
Digital assets and prediction markets have opened new horizons and created new risks, and we cannot expect the agency to keep up if Congress does not set the appropriate rules and regulations and give the CFTC the staffing, funding, and tools it needs to do its job well. We are asking a 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 current demands, and without sufficient staff, the CFTC simply cannot provide the rigorous oversight that consumers and market participants need. That includes having a full five commissioners in place as Congress intended. We have watched the growth of event prediction platforms, markets where people can wager on outcomes ranging from March Madness to geopolitical crises. We have seen alleged insider trading on platforms like Polymarket and other offshore entities, where individuals reportedly made enormous profits betting on political events. When people can gamble on war or political instability and potentially use nonpublic or sensitive information to do so, that crosses a red line. We need a full review of whether these platforms violate local and state gaming laws, and we should keep in mind the unique role that tribal governments play in this space.
CFTC Chairman Michael Selig
The agency has taken a leading role in delivering on President Trump’s mandate to make the U.S. the crypto capital of the world. The CFTC joined an SEC interpretation to provide guidance that resolved significant ambiguity in the marketplace as to which types of crypto assets are commodities and which are securities. We have worked quickly to provide clarity concerning tokenized collateral, the capital treatment for payment stablecoins, and the obligations of software developers building in the U.S. I 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 every day. I am optimistic that Congress will soon send this landmark legislation to the President’s desk. The agency is working to provide explicit guidelines and further strengthen investor protections for prediction markets, which offer trading in event contract derivatives that are regulated under the exclusive jurisdiction of the CFTC. Commission staff recently issued a prediction markets advisory and published a notice soliciting public input before considering new regulations for these markets. 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 you will face the full force of the law. 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.
DISCUSSION
Chairman Thompson (R-PA): Where do you see the process on the CLARITY Act in the Senate, and how important is it in your estimation to get the CLARITY Act done? Chairman Selig: We have had too much ambiguity in these markets for far too long. The crypto asset community wants to build here in the U.S. and develop technologies that will move our country forward, promote innovation, and maintain market integrity. They need solid legislation that provides future-proof clarity for the markets. I am concerned that if we do not get this right now, we will continue to see a lack of certainty, consumer protection, and clarity in these markets that will drive builders and innovators offshore. I applaud the efforts of this Committee to get legislation finalized that will distinguish between securities and commodities and provide the investor protections and consumer protections that the American people deserve.
Chairman Thompson: Can you explain the Commission’s jurisdiction and authorities with respect to event contracts? Selig: Congress wisely granted the CFTC broad, exclusive jurisdiction over commodity derivatives markets, and the CEA has a broad definition of commodity. When there are new, creative instruments that are structured as derivatives, we have the authority to regulate those to the extent that the underlying asset is a commodity. With that broad definition, it covers a lot of things. We take this responsibility seriously to police fraud, insider trading, and manipulation in the markets, and we are defending that authority in court. As I am sure this Committee is aware, we are involved in active litigation, so I cannot speak to some of those matters.
Ranking Member Craig (D-MN): Do you think it is 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, given the increased demands on your time? Will you call for Democratic Commissioners? Chairman Selig: Yes, I do believe that we are running more efficiently and effectively than ever before, thanks to some rightsizing of the government that has occurred under this administration and to the President’s leadership. We are utilizing new tools, from AI to automation and other surveillance systems that we are building out, and we take this responsibility seriously. The President makes decisions around nominations, and I look forward to working with whoever the President nominates. In the interim, we cannot slow down in our rulemaking.
Ranking Member Craig: How are you overseeing prediction markets? Selig: The CEA sets forth a regulatory scheme where the exchanges are the first line of defense. They are self-regulatory organizations (SROs), 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 are also the first line in reviewing contracts that are listed. These contracts are typically self-certified with the agency, with the exchanges certifying to us that they are not readily susceptible to manipulation, among other things. We are always reviewing the activity of these exchanges on a regular basis and reviewing each contract self-certification. We can reject those contracts, and we regularly do. It is a comprehensive scheme with multiple levels of review for each contract and various market activities, and we will continue to work with the exchanges to ensure the markets are well functioning. We have submitted our ANPRM on prediction markets for the record, which covers many of these new self-certified contracts in the event contract space. We are soliciting input as to what sorts of standards and guidelines we should have in the marketplace.
Representative Scott (D-GA): Can you clarify what the CFTC-SEC partnership will accomplish and why it is so important to the CFTC? Chairman Selig: For too long, the SEC and CFTC have failed to work well together, and this has been to the disadvantage of the American people. When our agencies are unable to share information and coordinate at the staff level, things fall through the cracks. It also means that sometimes we might act in different ways, which will lead to inconsistent rules and regulations for the American people. Under this MOU, we have committed to work together on certain areas of shared regulatory interest and for our staff to share information and coordinate on various matters. This can include surveillance and policymaking, as well as ensuring that staff have open lines of communication on all matters.
Representative Scott (R-GA): How should Congress ensure decentralized exchanges and platforms meet the same standards as our regulated exchanges, and what is the risk if we do not? Do you think updating and formalizing the Commission’s research mandate and tools makes sense, and how will this help the agency? Chairman Selig: The markets here in the U.S. are subject to comprehensive CFTC regulation. We are aware of some of these products trading offshore in markets that are not comprehensively supervised by us, and our goal is always going to be to onshore those markets and to have them subject to our regulation here in the U.S. and accessible to U.S. persons. We are monitoring this, and to the extent there are products available that are taking liquidity out of the U.S., we will make sure that we bring it back here under comprehensive regulation. It is essential that we future-proof the agency and modernize it for things to come. That can include research, the use of new technologies, and understanding those technologies. We have taken clear leadership on that since I joined the agency, making sure the staff are prepared for this new age of innovation.
Representative McGovern (D-MA): Are you aware that President Trump’s son is an advisor for both Kalshi and Polymarket? Are you concerned with corruption in these markets? Chairman Selig: All market participants are in competition. I am aware of this. The hypothetical that you are trying to engage in is political. 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 seriously, and it is insulting that you are insinuating that we would. We have a zero-tolerance policy when it comes to fraud, abusive trading practices, and manipulation, and anyone who engages in that behavior will face the full force of the law. We have a zero-tolerance policy when it comes to fraud, manipulation, and insider trading, and we will bring actions accordingly.
Representative Bacon (R-NE): Can publicly available trading data disclose individual traders, their individual positions, or the intentions behind individual trades? Does the Commission, either directly or with applicable SROs, examine reports of insider trading in the markets regulated by the Commission? Has the Commission examined the facts behind some of the recent accusations of insider trading in oil and S&P 500 futures? Chairman Selig: We have a number of different venues for transparency in our markets. The exchanges themselves have order books that we are monitoring as the CFTC in our role as regulator of these markets. We 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. The public has a line of sight into what is happening over the counter as well as on the exchanges, and the CFTC is the real line of defense, monitoring all of that. As SROs, exchanges can surveil, police, and monitor their markets. They have rulebooks that expressly prohibit insider trading, market manipulation, and other abusive trading practices. Some of the exchanges have recently brought actions both in the prediction markets space and in other contexts in our more traditional markets, and that is something exchanges do on a regular basis. We are examining and overseeing those programs as the regulator of these SROs and will continue to do so. We have a zero-tolerance policy when it comes to fraud, insider trading, and manipulation in our markets, and we are actively policing and surveilling these markets.
Representative Johnson (R-SD): Do you feel the CLARITY Act gives you the legal authorities and the tools you need on the spot market side? Chairman Selig: The legislation is critical to allow for exchanges, brokers, and custodians to register with the CFTC. We have seen for too long this patchwork of state licensing regimes, whether in virtual currency or money transmitter licensing. I do believe that everything I have seen to date provides the agency with the authority it needs to comprehensively regulate these markets, to have registration of new market participants, and to make sure that we are truly a future-forward regulator for this new asset class.
Representative Adams (D-NC): If Robinhood recognizes mention market contracts as susceptible to manipulation and insider trading, why does the CFTC not? Do you believe that they are not susceptible to manipulation? Chairman Selig: We have put out an ANPRM on this subject, so I do not want to prejudge any of those issues. We have laid out a list of questions related to this subject, as well as many others, and we are hoping to get stakeholder input from anyone who wants to comment on this issue. The exchanges are the first line in determining whether a contract is readily susceptible to manipulation, and it is a serious matter to self-certify that and to certify to the Commission that that is the case. We evaluate that and will continue to do so, but it is important that we get input from the community on these issues through our rulemaking process.
Representative Salinas (D-OR): Has the Commission considered whether additional safeguards, such as geofencing, might be appropriate for sports event contracts? Chairman Selig: We have put out an ANPRM when it comes to prediction markets, and we are soliciting comments as to any changes to our rules with respect to these products. We are taking input from members of the tribal community. I have met with several of the tribes and will continue to meet with them, so that is certainly an issue we will consider.
Representative Davis (D-NC): What are the most meaningful ways the SEC-CFTC MOU will improve regulatory clarity and consistency for market participants, particularly in areas like digital assets where jurisdiction has historically been less clear? Chairman Selig: If we have different rules and requirements on the securities side from the commodities side, that can create market issues and result in having to use different blockchains and technologies on each side. We want things built in a way that works for both securities and commodities. There are differences in the way we regulate and our requirements, so having open lines of communication and the ability to share ideas and work together to make sure we get it right on both sides in a way that fits comprehensively and works well together is important to the American people. Chairman Atkins and I are committed to working together, and this MOU solidifies our vision for comprehensively and well-regulated markets. For too long, our software developers, our builders, and our innovators have been living in a world of uncertainty, where they are trying to build software systems that oftentimes achieve the goals of our regulations but may do it in a way that is slightly different from the way our rules and regulations are set up and the way that they require things to run. We need to create a future-proof, flexible regulatory scheme that allows for these software systems to function.
Representative Budzinski (D-IL): Do you have any thoughts or feedback on the PREDICT Act on what additional steps you would recommend to rooting out insider trading and protecting the integrity of the prediction markets? Chairman Selig: It is vitally important that we protect our markets from insider trading, fraud, manipulation, and abuse. We have a zero-tolerance policy when it comes to any of this activity in our markets. It is in our statute currently to police these things, but we can always use additional authorities. In our statute, the insider trading authority is based on our anti-fraud and anti-manipulation authority, and so it is quite broad, but there are always areas where we can expand that.
Representative Vasquez (D-NM): Does a contract on a single player’s performance on a single statistic hedge any real economic risk? Chairman Selig: 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. Our statute mandates it, and we will continue to do it.
Representative Rose (R-TN): Does the language in the Commission staff’s March 2026 Prediction Market Advisory 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 III, and therefore may fall outside permissible event contract activity under existing CFTC regulations? Chairman Selig: The CFTC staff has issued the advisory you are referencing, which provides considerations for the marketplace and for our exchanges that are self-certifying contracts as they evaluate them and put them up for self-certification. We are hoping to provide more concrete rules and regulations around the self-certification process in the near future.
Representative Moore (R-AL): Can you talk a bit about how the Commission is getting ready for that authority granted by the CLARITY Act and how you are working with the SEC now to build a clear framework that can last through future administrations, so that we do not need to go back to regulatory enforcement? Can you talk about what the CFTC is doing to help build a durable framework that protects people who are simply building software and not holding customer funds, so that we do not go backward a few years from now? Chairman Selig: I applaud this Committee’s efforts to pass bipartisan crypto asset market structure legislation. The legislation is key both to identifying what is a security and what is not, and to having some certainty in the statute as to what is subject to the SEC’s authority and what is subject to the CFTC’s authority.
Representative Carbajal (D-CA): Do you believe event contracts related to terrorism, assassination, war gaming, and illegal activity are contrary to the public interest? In your view, are there subjects that should be clearly off limits for prediction markets? Chairman Selig: In a free market, it is important to have access to financial tools, hedging tools, risk management tools, and a broad range of different types of commodities, as our statute is designed with a broad definition of commodity. It is important to distinguish between what you call 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. It is important that we continue to oversee these markets comprehensively, whether the market involves a sports-related derivatives contract, a political derivatives contract, or a derivative on corn or grain. These are derivative instruments. They trade on federally regulated exchanges with order books, with clearinghouses, and all the investor protections that you would expect for sophisticated financial markets. We will continue to enforce our statute, but it is critical that we receive input on potential rulemaking in the area of prediction markets, as there are unique considerations regarding retail participation in these markets, among other things.