CFTC Chairman's Bold Commitment: If the CLARITY Act Stalls, We Will Step In to Establish Regulations Directly.
Written & Compiled by: KarenZ, Foresight News
Over a century ago, when futures trading was just emerging, it was also called "gambling" by U.S. politicians.
Today, CFTC Chairman Michael S. Selig has brought up this piece of history again.
On August 20th local time in the U.S., at the first meeting of the U.S. Commodity Futures Trading Commission (CFTC) Innovation Advisory Committee (IAC), Selig spent a significant portion of his speech reviewing the history of the futures market: 19th-century commodity exchanges faced blockades from state-level "anti-gambling" laws, and commodity options were also restricted for a long time, but ultimately, the U.S. chose to establish a unified federal regulatory framework to allow new financial products to develop under clear rules.
Selig's message was not complicated: the current debates around Crypto, artificial intelligence, and prediction markets are not entirely new to him. The real question for regulation is not just "whether to allow innovation" but how to bring innovation into a regulable market framework.
Therefore, at this meeting, Selig publicly outlined his so-called "Roadmap for the New Frontier of Finance" for the first time in a relatively complete manner.
The roadmap has three main lines: Crypto, AI compute markets, and prediction markets.
Among them, the most impactful signal for the crypto industry is: Selig still views congressional passage of crypto market structure legislation as the preferred option, but he also clearly stated that if relevant legislation continues to stall, the CFTC is prepared to study using its existing legal authority to establish a regulatory system for crypto asset markets.
Route 1: If CLARITY Continues to Stall, CFTC is Prepared to Act Using Existing Authority First
Crypto was the part with the strongest policy signals in this speech.
Selig first reaffirmed Project Crypto, which the CFTC and SEC are jointly advancing.
In January this year, the SEC and CFTC upgraded Project Crypto (originally推进 by the SEC) to a joint project involving both regulators, hoping to solve a core problem that has long plagued the U.S. crypto industry: which Crypto Assets are securities, which are not, and where the regulatory boundaries between the SEC and CFTC lie.
By March this year, the two agencies further jointly released an explanatory document, classifying Crypto Assets into five categories based on characteristics and functions: Digital Commodities, Digital Collectibles, Digital Tools, Stablecoins, and Digital Securities. The document explicitly discussed scenarios where some Crypto Assets are not securities, as well as how activities like Protocol Mining, Protocol Staking, Wrapping, and Airdrop are handled under federal securities laws.
However, for Selig, explanations from administrative agencies are not enough.
In this speech, he still regarded congressional passage of crypto asset market structure legislation as a more important and lasting solution, and explicitly mentioned the CLARITY Act.
One of the core meanings of the CLARITY Act is to further divide the regulatory boundaries between the SEC and CFTC for digital asset markets through legislation and establish a statutory regulatory framework for related markets.
What really deserves attention is the "Plan B" that Selig presented later.
He said, if the CLARITY Act ultimately continues to stall, the CFTC will use its existing authority to start establishing a regulatory system for Crypto Asset markets. To this end, he has asked CFTC staff to begin researching rule-making plans.
According to Selig's described vision, this plan may allow existing CFTC-registered institutions and currently unregistered Crypto Exchanges to be designated by the CFTC as a special type of Designated Contract Market (DCM), the so-called "Crypto Asset Market."
These markets may then provide leveraged or margin-based Crypto Asset trading under CFTC supervision and specially designed rules.
The word "may" here is very important. Selig's original words were that staff have started exploring rules, and the relevant framework could enable the above arrangements. Therefore, it cannot currently be understood as "the CFTC has approved Crypto Exchanges to convert to DCMs," nor as an already effective market access system.
In addition, Selig also revealed another piece of work worthy of attention from the DeFi industry: he has asked CFTC staff to directly communicate with developers of Onchain Finance Protocols to study how developers can provide relevant protocols in the U.S. in a legal and compliant manner.
This also does not provide specific exemption standards or regulatory conditions, but at least indicates that when the CFTC discusses crypto regulation next, the scope will not be limited to centralized trading venues like Coinbase and Kraken; on-chain financial protocol developers have also been included in the discussion of regulatory framework design.
Route 2: Turning GPU Compute into a Market That Can Be Priced and Hedged
Compared to Crypto, Selig's approach to AI is quite different.
The CFTC is not responsible for regulating AI models themselves. What Selig has set his sights on is another asset behind AI: Compute, i.e., computing power.
As the demand for high-performance GPUs in large model training and inference grows, compute power has become one of the most important production factors for AI enterprises.
Selig's judgment is that as compute power becomes increasingly scarce and economically valuable, the demand for establishing spot, forward, and derivative markets around compute power will also emerge.
In simple terms: currently, when enterprises purchase compute power, they often face issues like price changes, long-term supply, and resource allocation; if a more mature and transparent Compute Market is formed in the future, it could enable price discovery like energy or other commodity markets, while allowing risk management through forwards and derivatives.
Selig stated that the CFTC has collaborated with the U.S. Department of Commerce and released a request for comments on Compute Markets one week before this speech. The next step will be to study the relevant regulatory framework based on market feedback.
This means that the "AI regulation" mentioned by the CFTC does not currently equate to regulating large models themselves. For a derivatives regulator, its more direct entry point is: when compute power becomes an economic resource that can be priced, traded, and hedged, how should the corresponding financial market operate?
Route3: Prediction Markets Are No Longer Just About "Whether to Allow", CFTC Starts Discussing "How to Regulate"
After the rapid development of platforms like Polymarket and Kalshi, a long-standing problem has become increasingly acute: should event contracts related to sports, politics, etc., be classified as federally regulated commodity derivatives or subject to state-level gambling laws?
Selig's attitude in this speech was very clear.
His position is that Congress has granted the CFTC exclusive regulatory authority over commodity derivatives in Designated Contract Markets (DCMs); as long as they are legitimate derivatives, the CFTC will continue to maintain this federal regulatory authority, including defending its jurisdiction in court.
But at the same time, he also acknowledged that the CFTC has historically not established a sufficiently complete regulatory system for event contracts that addresses their special risks.
Notably, Selig did not simply summarize the path for prediction markets as "opening up." Instead, he listed a fairly specific regulatory roadmap in this speech.
First, the CFTC has proposed revising Rule 40.11.
U.S. law stipulates that for specific categories of Event Contracts involving war, terrorism, assassination, gambling, and illegal activities, the CFTC can impose restrictions based on public interest. However, current regulations do not fully define key concepts like "gaming" and "involve," nor do they establish a complete public interest judgment standard.
Selig stated that the new Rule 40.11 proposed by the CFTC in June this year aims to make these standards more specific and establish a case-by-case contract review mechanism.
Second, the CFTC has proposed redesigning the data reporting system for fully collateralized event contracts. In the past, some event contracts relied on regulatory "no-action letters" to handle reporting obligations. The CFTC proposed a new regulatory plan in June this year, hoping to turn this temporary arrangement into a formal and unified reporting system.
Third, and more值得关注 in the next stage: Selig stated that he expects the CFTC to soon propose a series of revisions to CFTC Regulations Part 38 and Part 40 to update the core principles of DCMs and product listing rules applicable to Event Contracts.
Especially值得注意的是, he explicitly mentioned retail consumer protection, product governance, market design, and incentive programs.
This means that the current policy direction of the CFTC for prediction markets is not simply discussing "whether prediction markets are gambling," but has entered a more specific second stage: if it is regarded as a regulated financial market, what listing, governance, reporting, and consumer protection rules should exchanges comply with?
The Most Intense Moment of the Meeting Also Occurred in the Prediction Market Section
Compared to AI, the prediction market section had a明显 more intense atmosphere. This分歧 directly erupted at the meeting that day.
CME Group Chairman and CEO Terry Duffy first clearly stated that he is a firm supporter of the crypto market (has supported it since 2017 and was the first to launch crypto futures on CME) and also has a positive attitude towards the application of AI in risk management. However, when the topic turned to prediction markets, his attitude became extremely harsh.
Duffy unreservedly pointed out the current chaos in prediction markets, also mentioning "Maduro contracts" (related to political events) and contracts related to the "presidential teleprompter situation,"直言 such products clearly have room for manipulation. In addition, some sports event contracts are not only result-oriented but also involve personal performance, which is easily subject to human intervention. Launching contracts that are easy to manipulate will damage the reputation of the entire industry and run counter to former President Trump's goal of "making the U.S. a crypto capital."
Selig directly interrupted Duffy, pointing out that the contracts he cited were not launched in the U.S. but on overseas platforms.
Kalshi co-founder Luana Lopes Lara directly countered: "Since we were named, I want to ask: has CME ever had any market manipulation issues in its history?"
Duffy did not back down: "If you want to debate, I'm happy to. But I have more regulatory staff than your entire company."
Lara retorted: "Then you might want to learn about efficiency."
Duffy then threw out the final devastating retort: "Then you might want to learn what a credible market is."
This debate actually explains why the CFTC is revising its rules. The real issues that prediction markets need to solve are: which events are suitable as contract underlying assets, what product review responsibilities exchanges should bear, how to monitor market manipulation and information advantages, and what kind of protection retail users should receive.
What Did This First Meeting Actually Confirm?
The CFTC Innovation Advisory Committee's own responsibility is to provide advice to the CFTC on issues at the intersection of technology, law, policy, and finance. The views of committee members do not automatically represent the CFTC, nor will they directly become effective regulations just because of a meeting discussion.
Currently, IAC members span the crypto and traditional financial markets, including leaders from institutions like Coinbase, Uniswap Labs, Ripple, Kraken, Gemini, Solana Labs, Chainlink Labs, Polymarket, Kalshi, as well as CME Group, Nasdaq, Cboe, ICE, DTCC, Franklin Templeton, Robinhood, etc.
But if we look at this meeting together with Selig's speech, it at least makes what the CFTC plans to do next more clear:
For crypto assets: prioritize waiting for Congress to establish market structure, but also prepare to study using existing authority to establish the CFTC's own crypto market rules; for AI: try to develop compute power into a new commodity market with price discovery and risk hedging functions; for prediction markets: prepare to establish more systematic rules around event contract access, data reporting, market supervision, and consumer protection.
These three things seem very different, but the regulatory thinking given by the CFTC is actually consistent.
Selig repeatedly returned to one point in his speech: after financial innovation emerges, instead of waiting for disputes to disappear, it is better to determine market operation rules as soon as possible.
Therefore, what is really worth paying attention to in this first IAC meeting is: when the underlying assets of the next-generation financial market become crypto markets, compute markets, and prediction markets, how should the original commodity and derivatives regulatory framework be extended to them?
From the roadmap公布 by Selig, the CFTC has decided to start acting.