SENATE AGRICULTURE COMMITTEE NOMINATION HEARING FOR QUINTENZ
On June 10, the Senate Committee on Agriculture, Nutrition, and Forestry held a confirmation hearing to examine the nomination of Brian Quintenz for Commodity Futures Trading Commission (CFTC) Chairman.
Key Takeaways
- Chairman Boozman (R-AR) stated that solely the CFTC should regulate the trading of digital commodities due to its market knowledge and understanding of the unique characteristics of commodities and commodity-based contracts, alongside its flexible and constructive regulatory approach.
- Chairman Boozman asked how self-certification is striking the right balance between allowing the Commission to prohibit unlawful contracts while fostering liquid and efficient markets and supporting market innovation. Quintenz responded that it was a critical feature of the Commodity Futures Modernization Act (CFMA) of 2000. He noted that many were delisted because they did not develop liquidity, while some became critical to risk management, liquidity, and price discovery markets.
- Quintenz discussed how the Commodity Exchange Act’s (CEA) principles-based approach to regulation and self-certification framework has created a marketplace that continues to thrive with integrity while also innovating with new hedging tools to manage varying risks. He called for regulation that is both pro-innovation and pro-customer protection. He said that principles-based regulation prevents a one-size-fits-all regime that locks in the technology approach or a standard approach.
- Quintenz affirmed his commitment to ensuring that CFTC-regulated markets remain the most innovative, liquid, and resilient hedging and price discovery markets. He reiterated his intention to continue the CFTC’s strong focus on risk, innovation, as well as reciprocity with foreign jurisdictions, in addition to his commitment to sponsoring the Agriculture Advisory Committee.
- Several discussions cited the growth of prediction markets, with Senator Hyde Smith (R-MS) questioning how the CFTC should approach prediction markets in balancing innovation with the need for regulatory clarity and market integrity. Quintenz said he does not want to be a value judgment regulator and will work to take a clear approach that is predictable, repeatable, durable, and legal.
- Senator Marshall asked about CFTC’s role in both allowing responsible innovation in areas like 24/7 trading and perpetual futures contracts, but also ensuring traditional market structures are not exposed to potentially harmful changes. Quintenz recognized concerns from agricultural and energy markets, stating that there is no reason that 24/7 trading, if it is allowed for and flourishes in one area, must translate to other areas.
- In response to Ranking Member Klobuchar’s (D-MN) concerns about expanded derivatives trading hours causing price dislocation, especially in lower volume markets like agricultural markets, Quintenz noted the unique trading hours between agricultural contracts. He emphasized that the CFTC should prioritize input from all stakeholders, particularly agricultural risk managers and hedgers, before permitting broader adoption.
- Democrats, led by Ranking Member Klobuchar (D-MN), questioned Quintenz on his potential conflicts of interest relating to crypto and event contracts due to his roles with A16z and Kalshi.
- Senator Smith (D-MN) and Warnock (D-GA) questioned Quintenz on whether he would encourage the President to nominate minority Commissioners to ensure bipartisanship within the Commission, cautioning against erosion of regulators’ independence. Quintenz responded that the President will make his own decisions with the advice and consent of Congress, with Senator Warnock emphasizing the Chair’s responsibility to preserve the bipartisan spirit of moderation at the CFTC.
SUMMARY
Opening Statements and Testimony
Chairman John Boozman (R-AR)
Well-regulated and efficient commodity markets help producers manage risk. As farmers face elevated input costs, interest rate uncertainty, price volatility, and natural disasters, futures markets provide essential tools for protection. Over the years, the CFTC’s pragmatic, principles-based approach has resulted in a workable regulatory framework that allows markets to function efficiently. The CFTC has historically engaged in constructive dialogue with regulated entities and market participants, building trust and confidence in the agency. This approach, combined with diligent policing of cash and derivatives commodity markets, has made U.S. derivatives markets the envy of the world. At the same time, the CFTC’s role may expand as Congress considers granting the agency authority to regulate the spot digital commodity markets. Additionally, new markets and products, such as prediction markets and crypto-based derivatives, have emerged and will require the Commission’s attention. The CFTC is the right agency to regulate spot digital commodity trading. The CFTC, and only the CFTC, should regulate the trading of digital commodities because only the CFTC understands the unique characteristics of commodities and commodity-based contracts. Its market knowledge, combined with its flexible and constructive regulatory approach, makes it the right regulator for spot digital commodity markets.
Ranking Member Amy Klobuchar (D-MN)
The CFTC plays a vital role in ensuring the integrity of U.S. financial and agricultural markets, which includes protecting market participants from fraud and manipulation, maintaining orderly derivatives markets, and enabling farmers, ranchers, manufacturers, and small businesses to hedge against risk. The CFTC is being called upon to address not only the emergence of novel financial products and technologies but also broader shifts in market structure, including the rise of nontraditional platforms and changes to established ones. These developments raise important questions about the scope of the CFTC’s oversight and its ability to respond quickly and effectively to risks in complex, fast-moving markets. To meet these challenges, it is in the public interest that the CFTC has not only a confirmed Chairman but also a fully functioning Commission with the bipartisan balance and independent structure that Congress intended. It is also essential that the CFTC has institutional capacity, both in staffing and resources, to fulfill its mandate in the face of emerging challenges. At the same time, the CFTC must foster a regulatory environment that supports responsible innovation and adapts to new technologies without compromising its core responsibilities. Quintenz’s private sector experience is also relevant, though we will be interested in discussing potential recusal matters related to issues that may come before the CFTC. The next Chair will face a full agenda, from disintermediation and digital asset oversight to improving transparency in Treasury futures and protecting retail customers in the wake of recent failures. Several priorities tied directly to the CFTC’s core mission are safeguarding rural co-ops and end users, strengthening coordination with other regulators, and modernizing surveillance tools to detect market abuse before it harms consumers.
Brian Quintenz, Nominee for CFTC Chairman
We are at the precipice of a golden age for innovation, our derivatives markets, and the CFTC. This could prove to be the most exciting time in the Commission’s history. I will work with Members of the House Agriculture Committee, market participants, and stakeholders, especially in the agricultural space, to ensure that CFTC-regulated markets remain the most innovative, liquid, and resilient hedging and price discovery markets on the planet. I pledge to continue to visit producers and to hear about our agriculture industry’s use of, access to, and concerns with derivatives markets, as well as to adopt a longstanding practice of the CFTC Chair sponsoring the Agriculture Advisory Committee. I am proud of the record that I established as a Commissioner, where I focused on three main objectives: risk, innovation, and harmonization. I pledge to continue the CFTC’s strong focus on risk, innovation, as well as reciprocity with foreign jurisdictions. I will have no tolerance for bad actors who defraud, manipulate, or cheat in the CFTC’s markets. Customer protection has always been a key attribute of well-regulated markets. The CFTC is a systemic risk regulator and oversees perhaps the world’s most systemically important financial entities: derivatives clearinghouses. First and foremost, the agency must remain laser-focused on meeting its systemic regulatory mandate. The CFTC is both the world’s most innovative financial regulator and its most technologically advanced. This is because of the Commodity Exchange Act, which is by far the world’s most innovation-focused statute. The CEA’s principles-based approach to regulation and self-certification framework has created a marketplace that continues to thrive with integrity while providing individual small businesses and large firms with new hedging tools to better manage their financial, commercial, and economic risk. I have had a direct line of sight into the future of this technology and how it could transform our lives. I view blockchain as a horizontal technology that has the potential to touch every aspect of society, not just as a vertical technology purely focused on financial services. I have a strong conviction that the surest way to undermine U.S. global leadership in blockchain technology is to let bad actors and fraudsters proliferate.
DISCUSSION
Chairman Boozman (R-AR): As Congress deliberates on granting the CFTC spot digital commodity regulatory authority, why do you believe the CFTC is the right regulator Quintenz: As crypto assets and blockchain technology evolve and become decentralized, they allow networks to form and that governance process to be released outside of the control of an individual person, entity, or business, and be distributed in a transparent way. That poses new and interesting questions from a regulatory perspective, given that networks never just exist. We cannot take action that would preclude innovation, but we also must be careful when that is happening that customers are protected. Congressional action can be very pro-innovation and pro-customer protection at the same point. If Congress decides to give authority to the CFTC to regulate spot digital commodity markets exclusively, the CFTC is more than up for that mandate and that mission. We have ten years of history in the crypto asset environment, starting with enforcement cases, but then moving to innovation with the listing of the first regulated Bitcoin futures contract in the world.
Chairman Boozman (R-AR): Can you talk about the importance of self-certification Quintenz: It was a critical feature of CFMA. Theoretically, if you put yourself in the shoes of a regulator, there are not a lot of incentives to approve new products. You bear all the downside risk and get none of the benefit of the success. It is natural to focus on all the risks, and at the extreme, the precautionary principle approach, where you have to prove that nothing bad could ever happen before you allow something to happen, means it will never happen. That is proven in the data. In the seventy years before self-certification existed, futures exchanges listed about 700 products in total. In the twenty years since self-certification came online through the CFMA, 16,000 new contracts have been listed by exchanges. None of them caused the financial crisis. Many were delisted because they did not develop liquidity, but some became critical to risk management, liquidity, and price discovery markets.
Chairman Boozman (R-AR): Can you talk about the importance of principles-based regulation? Quintenz: I am a strong believer in the benefit of principles-based regulation because it allows responsible innovation and allows the marketplace to evolve, to try new things, to be held to a standard of best practices, which do continue to evolve on their own. It prevents a one-size-fits-all regime that locks in the technology approach or a standard approach. But in order for this to be done compliantly and responsibly, there has to be a strong dialogue between the regulator and the marketplace to ensure that the regulator understands the different approaches that are out there.
Ranking Member Klobuchar (D-MN): What specific regulatory tools or approaches would you use to ensure that innovation in cryptocurrency does not come at the expense of basic safeguards and customer protections for the public? Quintenz: Should the CFTC receive new oversight responsibilities through Congress, I believe it can take a technology-first approach to that oversight, where we can look to ensure that the most up-to-date technologies are used so that we can spend taxpayer dollars efficiently and effectively. Any new additional headcount that the CFTC decides to commit to that oversight is 10x an employee compared to what they otherwise would be without that technology.
Ranking Member Klobuchar (D-MN): Do you think you would need additional funding and staff to write the rules that would come out of legislation? Quintenz: To write rules that would come out of any legislation, I think it would be a challenge, not to mention oversight. It would be a challenge to undertake a lot of that responsibility, certainly the oversight part. The rule-writing groups within the CFTC are smaller, but once rules come online, there has usually been a precedent to afford the agency new resources with new authority and jurisdiction.
Ranking Member Klobuchar (D-MN): With the growing interest in expanding derivatives market trading hours 24/7 and the CFTC’s request for comment, what is your view on how the CFTC should approach the shift, and do you believe you will need to revise this rule to accommodate these developments? Quintenz: Agricultural contracts have unique and different trading hours between them. For instance, the corn contracts trade more frequently, whereas other contracts trade along more traditional hours. I think the CFTC would want to ensure that we take the view of all stakeholders into account, that we listen to the people that use these markets, that the views of risk managers and hedgers, especially in the agricultural space, are paramount before we try to allow for or copy innovation and then have it bleed through the system.
Ranking Member Klobuchar (D-MN): Given that the CFTC was structured by Congress as an independent commission, do you think it is appropriate for the OMB Director to play a central role in reviewing the agency’s performance and shaping spending decisions and policy agenda, and how does OMB’s role relate to the Commission? Quintenz: I commit that the CFTC will follow and comply with all executive orders. It is important that the CFTC conducts a robust cost-benefit analysis and has the partnership with other agencies, including OIRA and OMB, involved in that process. I would commit to that, with a strong allegiance to and adherence to the statute.
Ranking Member Klobuchar (D-MN): How will you carry out your divestitures within the agreed time frame, with your pledge to resign from roles tied to A16z and Kalshi? Quintenz: I hold myself to the highest standards of ethics and integrity. My reputation is critically important to me. I will abide by all applicable ethics statutes and regulations. I have a very robust ethics agreement requiring my divestiture. I will have a screener in my office to ensure that no matter inappropriately comes before me. There are a number of approved methods for divesting to ensure that I can meet the timelines, and I am prepared to explore all avenues to do that.
Ranking Member Klobuchar (D-MN): What should the CFTC do in response to the increasing retail participation in derivatives markets, especially events contracts and digital asset derivatives? Quintenz: It depends on whether or not there is direct access or whether or not there is intermediation. There are strong customer protections across both models. There is an extra layer of customer protection when they are intermediated by the FCM community that has to do with disclosures associated with potential loss, education, and outreach. There are even some exchanges that do go directly to market participants that have those same customer protections listed in their licenses.
Senator Hoeven (R-ND): How will you engage with producers to ensure they can use CFTC and hedging products to further manage the incredible risk they face? Quintenz: For the agricultural community, risk management derivatives markets are a critical component of their hedging portfolio. It is a tool in a toolbox but is certainly not the only one. The others they rely on you mentioned, such as countercyclical programs and crop insurance programs. There is an interesting tie between the crop insurance programs and our futures markets. Crop insurance programs are priced in the spring and in the fall, and they base those prices on the futures market.
Senator Hoeven (R-ND): What are your incoming priorities and what will you do differently? Quintenz: The CFTC is a small but mighty regulator and no one regulates markets better than the CFTC. One of the reasons it can do that so well is that it is a technology-first regulator, and it has the most advanced technology of any regulator that I have seen. If it is not broken, do not fix it. New innovation that meets the market must not be inhibited by the CFTC, but we must ensure that those new markets do have integrity.
Senator Hoeven (R-ND): What is the biggest challenge on the horizon? Quintenz: When the markets have experienced significant stress, derivatives markets handled that with flying colors. I do not want to minimize how difficult it was for people in the markets, in the intermediaries, and at the exchanges, but the derivatives markets performed very admirably.
Senator Smith (D-MN): Do you support maintaining the bipartisanship of the CFTC and Commissioner representation? Quintenz: No matter what the makeup is, I will continue exchanging views and engaging in deliberative dialogue.
Senator Tuberville (R-AL): Would you discuss your experience being debanked and the broader Biden administration attack on crypto? Quintenz: The only reason why this would happen is pressure from the regulators to debank a disfavored industry. It is endemic of what happened during the last administration that I do not think represented American values. There were investments that our firm was trying to make into small teams, and our firm could not even send them a check because they could not open a bank account because they were in the crypto industry. Legal businesses deserve access to legal services.
Senator Tuberville (R-AL): What are the benefits within the growth of prediction markets, and how can they be used for risk management when one may not otherwise have access to appropriate hedging tools? Quintenz: When I was at the Commission, the law was clear that the CEA recognizes that an event that poses financial, commercial, or economic consequences is a commodity. The reason that CFMA did that was because it recognized that events pose risks to individuals, small businesses, and large firms in the same way that exposure to physical commodity prices does. These events have been hedged in various capacities for a long time, but it has just been through large Wall Street firms and very complicated products, where there is not a lot of sight into how they operate, and without a market trading mechanism to create clarity around that. With the way that this innovation is evolving, there are going to be many new methods for individuals to hedge risks that they otherwise could not, because the innovation can be targeted to a specific event and they do not have to use some other generic form of hedging that may not correlate to that risk.
Senator Tuberville (R-AL): Can you discuss the regulatory enforcement clarity between the SEC and the CFTC as it relates to crypto, and what further congressional actions need to be taken? Quintenz: As I saw before and after my time at the CFTC, the SEC and CFTC either share jurisdiction over the crypto spot markets through enforcement, but it has really been the SEC’s decision to make in terms of which products are securities that they then carve out and take into their own jurisdiction. Both have had experience in the enforcement area of crypto, but for the CFTC, it has mostly confined itself to events of fraud and standard Ponzi schemes, which is not necessarily people using cryptocurrency, but saying that they are using cryptocurrency for investments and then just stealing people’s money. To the extent that new clarity can be added so that innovators and entrepreneurs can build compliantly, it is a critical thing for Congress to consider.
Senator Marshall (R-KS): What is your view on the CFTC’s responsibility in basic application processes, and will you commit to ensuring that the CFTC meets its deadlines in considering such applications? Is there a way you would go in and measure that to determine what is a reasonable amount of time, and if that is not met, report back and explain why? Quintenz: The CFTC needs to meet its mandate, both to the statute and to the markets. Part of its statutory mandate is to ensure that any new applications meet the core principles, but also to ensure fair competition, which means processing applications in a timely way. If they meet the obligations of the statute and there is not any reason to believe that anything nefarious is going on, as the Commission is evaluating new applications, it should do so expediently. Not having been at the Commission, I cannot speak to what the delays are involving any applications that are there now, but I would pledge to you and to the market to ensure that if applications meet the standards of the Act and meet the standards for market integrity, the Commission will process them expediently. I had not thought about how to measure it, but one way internally is asking the reviewers for applications how long it is taking them to respond with new questions once the applicant has responded to the previous set of questions, to understand how long that delay is. Another is just a conversation with the reviewing team to see what the status of these applications is when they come into the building. Are they robust or are they very weak, and is there a lot of work that is required? How many applications are we getting in general, and how are those being sorted?
Senator Marshall (R-KS): How do you view the CFTC’s role in both allowing responsible innovation in areas like 24/7 trading and perpetual futures contracts, and ensuring that traditional market structures are not exposed to potentially harmful changes that could impact ag markets? Quintenz: It is critically important that the CFTC listens to the end user community in the agriculture industry to ensure that we know very clearly what their preference is for how the products that they use are traded. There is an opportunity for different kinds of innovations to affect different industries at different times. There is no reason that 24/7 trading, if it is allowed for and flourishes in one area, has to translate to other areas and that is the case now. I pledge to have a very open dialogue with the agricultural industry. I have heard these concerns already around expanded trading hours and the possibility of getting liquidated while they are asleep and liquidity concerns, all I take seriously.
Senator Schiff (D-CA): If the court rules that certain contracts amount to prohibited gaming and violate tribal sovereignty and jurisdiction under the Indian Gaming Regulatory Act (IGRA), will you require the contracts to stop? Would you follow that mandate or appeal because you personally disagree with the ruling, or would you recuse yourself, given your background in a gaming business that could be affected? Quintenz: I would have a very robust all-stakeholder engagement process around this. Nothing in the CEA that I am aware of prohibits or affects the opportunity of tribes to offer those products in those markets and those services. I need to abide by the CEA, and if there is a conflict between the CEA and IGRA, that is best resolved through Congress. The CEA is very clear about the purpose of derivatives markets, the purpose of risk management and price discovery, and that events can serve a function in that mandate. I would need to recuse myself and think the CFTC would want to ensure that it is appropriately defending the CEA and the remit that the agency has to regulate, and preempt state laws around futures and derivatives markets.
Senator Schiff (D-CA): If confirmed, do you commit to holding a public roundtable on event contracts? Will you reschedule it before you issue any guidance on this topic? Quintenz: I do not know why it was cancelled and do not plan on issuing any guidance in the near term, so I feel comfortable making that commitment.
Senator Hyde Smith (R-MS): How do you plan to ensure the CFTC remains focused on its core mission of supporting well-functioning, transparent futures markets that producers can rely on for risk management? Quintenz: There is no room to let up on ensuring that the agency meets that critical mission, especially when it comes to our systemic risk mandate. A lot of people, I do not think, appreciate the fact that the CFTC is a systemic risk regulator that oversees what I believe are the most important, systemically important institutions—financial institutions—in the world. I would have no tolerance for ignoring those markets, and I would pledge to ensure that the CFTC’s full attention and historic attention is placed there.
Senator Hyde Smith (R-MS): How do you believe the CFTC should approach prediction markets, particularly in balancing innovation with the need for regulatory clarity and market integrity? Quintenz: The last thing I would want to do is to be a value judgment regulator and try to express my own value judgments on a marketplace and undertake a process that is opaque, inconsistent, and likely illegal. In the past, the CFTC has taken an approach that I had disagreed with in terms of adjudicating which kinds of contracts may be acceptable or not. That is the role of this body and of Congress to decide what is acceptable or appropriate. It is the role of the agency to follow the statute, and the statute is very clear that it is the purpose of the CEA and the purpose of the CFTC to support the derivatives markets that provide for hedging, risk management, price discovery, and price dissemination. I would try to take a very clear approach that is predictable, repeatable, durable, and legal.
Senator Booker (D-NY): Do you still agree with the statement that, because the statutory definition of commodities includes events or contingencies beyond the control of the parties and with financial, commercial, or economic consequences, any contract on the outcome of a future event would be considered a commodity futures contract and therefore required to be traded on a registered designated contract market under the CEA? Does that mean it would be illegal for sportsbooks or tribal communities to take bets on sports outcomes in New Jersey, California, or Nevada unless they are registered with CFTC exchanges? Quintenz: I do, and no, it does not. That quote omitted a critical detail, which is if those contracts are traded across state lines.
Senator Booker (D-NY): Do you agree on how undermining the clear language of the CEA, which states that event contracts involving gaming shall not be listed if the CFTC determines that they are contrary to the public interest? Quintenz: There is a special rule for the review of event contracts, and it mentions specific kinds of events that could trigger it. I have a very long statement when I was a Commissioner previously on this. That provision of the statute troubles me in terms of trying to execute it with repeatability and legality, especially in a post-Loper Bright world, because there is no framework that was provided for by Congress in terms of how to execute that appropriately or what constitutes the public interest.
Senator Justice (R-WV): What are your thoughts on the importance of and urgency around market structure legislation? Quintenz: I have always viewed market structure legislation as an opportunity to be both pro-customer protection and pro-innovation, and I believe we can do both. It can provide clarity for builders, entrepreneurs, and innovators to develop products that become networks, that become decentralized, and allow people to own how they participate, while also ensuring that central firms serving customers and requiring customer trust are appropriately regulated. That has been the hallmark of U.S. financial regulation. If the CFTC gets authority, it will be ready.
Senator Luján (D-NM): Do you believe that if the CFTC were given more explicit authority over digital assets, the agency would need more resources, including staff and infrastructure? Would you seek more appropriated resources to respond to rapid growth in crypto markets? Quintenz: Yes, it is precedential that new jurisdiction comes with new resources. I would anticipate that new resources would likely be needed and will be transparent with the Committee.
Senator Luján (D-NM): How will you work to oversee digital asset providers’ AML regimes now that the U.S. Department of Justice has deprioritized pursuing regulatory violations, such as compliance with the Bank Secrecy Act and violations associated with money laundering and other commodity laws by digital asset companies? Quintenz: Entities regulated by the CFTC currently qualify as financial institutions and therefore have to have AML/KYC programs supervised by the Financial Crimes Enforcement Network (FinCEN). In the crypto ecosystem, any intermediary or centralized business that has a customer relationship and accepts and transmits customer funds qualifies as a money services business and is also under FinCEN’s remit. I would imagine that both of those things, if Congress decided to pass a new regulatory authority, would not change.
Senator Warnock (D-GA): Do you agree there can be benefits of having minority Commissioners and that friction points can be helpful? How will you work to moderate the CFTC and incorporate dissenting and minority viewpoints in the Commission’s decisions? Quintenz: There can be. One of the core attributes of the Administrative Procedures Act (APA) is to put out any kind of rules and notices for public comment. Responses to public comments need to be incorporated into any kind of final Commission action. There is a wide opportunity for dissenting views in the public comment process. I would seek to receive comments from as wide of sources as possible, and I would pledge to work with Congress to have a very transparent approach. No one has a monopoly on the best ideas.