CFTC Chair Mike Selig argues for agency’s ‘exclusive regulatory authority’ in prediction markets fight: State of Crypto

Commodity Futures Trading Commission Chairman Mike Selig informed CoinDesk that the company will proceed to defend its “exclusive regulatory authority” to supervise prediction markets in court docket. “It doesn’t matter if it’s on sports, politics or anything else, if it’s a validly offered product within a CFTC-regulated exchange, then we regulate that,” Selig stated.

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NASHVILLE, Tenn. — The Commodity Futures Trading Commission is simply defending its territory in suing states over prediction markets, the regulator’s head informed CoinDesk.

CFTC Chairman Mike Selig, talking on the sidelines of the Digital Assets and Emerging Tech Policy Summit hosted by Vanderbilt University and the Blockchain Association on Monday, stated the agency’s lawsuits towards Arizona, Illinois and Connecticut make it “very clear … that the CFTC has exclusive regulatory authority when it comes to commodity derivatives markets.”

Selig, who’s talking at CoinDesk’s Consensus Miami convention subsequent month, stated Monday’s Third Circuit Court ruling that the CFTC has to supervise prediction markets bolstered his agency’s view.

Under Selig, the CFTC has launched into a serious litigation effort to bolster prediction markets’ arguments that they’re offering derivatives merchandise beneath the Commodity Exchange Act, slightly than playing companies regulated by states.

“Our view is that the statute is very clear that when you offer a swap on a federally regulated Designated Contract Market, that transaction, those trades, are subject to federal regulation,” he stated. “It doesn’t matter if it’s on sports, politics or anything else; if it’s a validly offered product within a CFTC-regulated exchange, then we regulate that, and the states don’t have the ability to nullify federal oversight and substitute gambling laws where derivatives laws apply.”

Asked why the CFTC didn’t sue Nevada or Massachusetts — two states which have efficiently secured preliminary injunctions towards prediction market suppliers — Selig stated that “I wouldn’t say, just because these are the first states, that they’ll be the last.”

He identified that the CFTC filed an amicus brief in a consolidated case earlier than the Ninth Circuit Court of Appeals, which will probably be heard next week. The Ninth Circuit consists of Nevada.

Dodd-Frank swaps

Under the Dodd-Frank Act, the CFTC can regulate swaps and might block sure sorts primarily based on whether or not they’re in the general public curiosity. These classes embrace warfare, terrorism, assassination, gaming, something in any other case unlawful or “other similar activity.”

Selig stated the principle challenge is that, beneath the regulation, the CFTC decides whether or not a product is opposite to the general public curiosity. The lawsuits it is engaged in are targeted on that side — regardless of the occasions underlying the contracts.

“Even if those categories of underlyings, whether it’s war terrorism, assassination, gaming, and so on and so forth, even if we have to do a public interest analysis, or we choose to do a public interest analysis, that doesn’t mean that that’s not within our exclusive regulatory authority,” he stated. “And so that’s what the cases are about, and that’s what we’re fighting for.”

The CFTC is currently going through the formal rulemaking process to make clear its oversight of prediction markets.

“We’re open to suggestions as to what that process should look like and how to evaluate it,” he stated. “We’re certainly considering that provision of the Dodd-Frank Act.”

Interpretative steering

Outside prediction markets, Selig stated the CFTC would evaluation any feedback on the ultimate interpretation it revealed with the Securities and Exchange Commission final month.

“To the extent we get feedback on certain things we might change or need to reconsider, we’ll certainly do that,” he stated.

More importantly, he stated, the creation of a taxonomy means if any firm desires to self-certify a futures product tied to a digital asset, the CFTC and SEC can simply look to their steering to make sure the token will not be a safety.

“To the extent you have a tokenized security, we’re not butting heads on the CFTC claiming it’s a commodity or the SEC claiming a different type of commodity as a security,” he stated. “We’ve got clear lines drawn in the statute.”

The steering was meant to be complete, so each the businesses and the businesses had examples, he stated.

“We should be very much aligned across agencies,” he stated.

Monday

• 13:00 UTC (9:00 a.m. ET) SEC Chair Paul Atkins will converse on the IMF-IOSCO conference on new applied sciences.

Thursday

• 14:00 UTC (10:00 a.m. ET) The House Agriculture Committee will maintain a hearing with CFTC Chair Mike Selig. There aren’t many particulars concerning the subject of the listening to — it simply stated it is “for the purpose of receiving testimony.”
• 16:00 UTC (9:00 a.m. PT) A Ninth Circuit Court of Appeals panel will hear arguments in a consolidated set of circumstances round prediction markets and state regulators. The CFTC filed an amicus brief in this case and also will converse through the arguments.

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