New CFTC Chairman Michael Selig on How to Regulate Prediction Markets

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You can find new episodes of the Blue Bag Daybake Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris. On Apple, Spotify, YouTube or wherever you get your podcasts. Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Wyzenthal. And I'm Tracy Alloway. Tracy, did you watch the Super Bowl? You know he's going to ask that, didn't you? I knew it. Actually, I was going to start exactly the same way. I did watch the Super Bowl and so I feel empowered to ask you a very controversial question. Not which half-time show you watched, but did Cardi B perform at the Super Bowl? Oh, right. Because this was a big thing. I forgot that there was, you know what, I'm aware of various sort of questions about prediction markets and things that people place best at. Well, how did that resolve? What was the basic issue here again? So I think it's still being resolved in various ways, but Cardi B, she was on set during bad bunnies, extravaganza, and she was kind of like dancing and singing along, like, mouthing words, at least, along with other people like Pedro Pascal and Jessica Alba. Yeah, Lady Gaga. Lady Gaga was singing singing. Right, right, right. The only reason this matters at all is because of prediction markets. So there was a bet Will Cardi B perform. Yeah. And now the question is, does standing on stage and kind of bobbing your head and mouthing words count as a performance? Polly Market says it does. CalShi says it doesn't. Oh, interesting. Yeah, there you go. CalShi and Polly Market split over whether Cardi B perform. That's a great tension. I like that. It was striking to me, stepping aside that I actually somehow seem to have missed the specific thing. Like how much prediction markets are now just part of the consumption experience, you know, even you look at all these different things that people are talking about. It was Lady Gaga going to show up somehow, like, someone made a bet on it before it went public. But also just like with each score, you know, you check the line is like how much did this move the expectations whether the sea hawks are leading like prediction markets are truly becoming part of like pop culture and how we interact with pop culture. There were some weird bets around like color of Gatorade that was going to get dumped on the coach. Yeah. Length of like the national anthem being sung. Did you see that? Like I was tempted by some of those, but I stayed away. I'm still not I haven't used Polly Market or CalShi. Probably wise. You know, the interesting thing too is like how much the moot is swung, right? Because a few years ago, like, I don't know, 2022, 2023. I think we did an episode like at that time, like there was almost nothing and this sort of like regulatory 180 that degree to the liberalization of these markets has been pretty remarkable, even, you know, going back to a year and a half ago, there was just a Polly Market and it was just the offshore version that you had to fund with stable coins. Yeah. And now it's like exploded at the time, you know, CalShi was very limited. They didn't have US access, etc., or very curtailed US access. Anyway, they're here and everyone's trying to wrap their heads around where this is all going. Yeah, it feels like they're much more sanctioned, I guess, than they used to. Yeah. Yeah. But that said, there are still some issues that people are trying to work out. You have ambiguous outcomes like did Cardi B actually perform. You have concerns around insider trading, not insider trading per se, because we're not talking about securities contracts, but maybe people with insider info who inadvertently disclose something material. I was thinking about this actually, so you can also bet on which companies are going to run Superbowl ads. And a lot of people must know if a company is going to run an ad like that, you have like the agency, the actors like everyone. And you could argue maybe that that's material non-public information, right? You run a Superbowl ad, you get a bunch of attention, maybe your share price goes up if you're publicly listed. Yeah. I don't know. There are so many things. Anyway, rather than us, just keep talking about them because we can talk for an hour. We really do have the perfect guest. We're going to be speaking with Mike Sealig. He is the new chairman of the CFTC, the main regulator for prediction markets. He's just sworn in in December. We're going to talk all about this, maybe some crypto as well. So Mike, thank you so much for coming out of the studio. Glad to be here. What do you tell us a little bit about just broadly coming into this new role? What are your goals here with the CFTC? We're really at a pivotal moment. You mentioned prediction markets. crypto, AI, all manner of new technologies and products that are impacting our markets. And the CFTC was really this kind of little known regulator before the financial crisis, regulating the futures markets. It has expanded jurisdiction now over the swaps markets, the over counter derivatives markets. And now we see so much innovation in that space with things like prediction markets and crypto with legislation on the perverge of hopefully being on the president's desk. And so the agency is really at this unique moment where it has the opportunity to shape the future of these new and emerging markets. And it's really exciting time to be in the seat. Do you have an opinion on whether Cardi B performed at the Super Bowl? I mean, it's funny, but it's also kind of relevant because I saw someone has actually filed a complaint to the commission about Calche's decisions specifically. Well, of course, we're spending a lot of resources investigating whether Cardi B performed after. Really our focus here is on the markets. So the unique thing that the great thing about the way that we regulate the market says that the exchange is themselves similar to on the security side are self regulatory organizations. So each exchange has its own rulebook that's been approved by the agency. It has its own requirements for contracts that are certified on the exchange. So of course, the Cardi B contract went through a self certification process and then they're settled in accordance with exchange rules. They go through a clearinghouse as well. So the exchanges each have these rulebooks and certain requirements around how the contracts are resolved and settled. And of course, now we're seeing some differences amongst Calche's rulebook and Pauli markets rulebook. But that's the great thing about our markets and having the ability to build a business to develop an exchange with some flexible guardrails on top that the agency oversees. But we don't prescribe exactly what has to be in the rulebook. We have a principal space system of regulation. What is the basis for something like is Cardi B going to perform at the Super Bowl halftime show? What is the basis for this being categorized as a true financial instrument regulated by the CFTC? Because it certainly just feels like prompt betting. Who has economic exposure? They need to hedge to Cardi B performing. There's a really interesting historical story around the definition of commodity and the markets that we regulate today starting back in the 30s when the commodity exchange act was first ratified. It was originally focused on grain and over time we've had things like work. Exactly. It's coming a very long way, of course, with the financial crisis. We got all manner of new products within our authority. But the definition of commodities extraordinarily broad. It includes virtually everything except a few things that have been carved out. Onions and motion picture box office for season. That's a really important point to note that they were expressly carved out. Most things in our commerce today, even securities are technically considered commodities under our act. We have authority to regulate them. In the case of securities, we coordinate with the SEC and have some joint authority. But for all other types of product services, rights, indices, people are going to hedge that risk. They're going to be in the market to speculate on those products. We don't regulate. We don't tell people what they should be entering into contracts on. We create rules and regulations around those markets to make sure they have integrity, that they're resilient, that they're vibrant, and they have guardrails and investor protections. That's why going back to the exchange rule books and other controls, self-certification, being an important process. We're making sure those markets are safe and secure. But we're not telling people whether to trade pork bellies or Cardi B contracts or anything else. Let's go to the insider trading question because this is top of mind for a lot of people. Technically, it's not insider trading, but it does look like some people have inside knowledge sometimes when they put on big bets on something that just happens to happen the next day. The CFTC hasn't as far as I know given a lot of guidance on this issue. How are you actually thinking about it? From a legal standpoint, I think there's a bit of a misunderstanding about the that are trading doctrine at the CFTC. So the authority at the agency is very similar to the authority at the SEC. Under our ANSI fraud, ANSI manipulation rule, we do have authority to police inside our trading in the commodity markets. Now, the way that insider trading is carried out is oftentimes different from a situation when you have informationally symmetries relevant to a company. But there are situations where you have informationally symmetries related to the markets, placing a trade ahead of a customer, for example, or even in this, this situation now has prediction markets. And that's something we are thinking about and certainly on the beat and exploring. So we survey all the markets. We collect data, we have information about. For example, our players participating in these markets are people associated with the sports leagues, et cetera. And so we are a cop on the beat in that regard. So the doctrine's not entirely different, but there are some nuances that we are aware of and making sure that we're policing for. (upbeat music) (upbeat music) - UKG, their HR pay and workforce management tools help business leaders empower their people. - Bloomberg Daybreak is your best way to get informed first thing in the morning, right in your podcast feed. - Hi, I'm Karen Moscow. - And I'm Nathan Hager. Each morning we're up early, putting together the latest episode of Bloomberg Daybreak US Edition. It's your daily 15 minute podcast on the latest in global news, politics, and international relations. - Listen to the Bloomberg Daybreak US Edition podcast each morning for the stories that matter with the context you need. - Find us on Apple, Spotify, or anywhere you listen. - Would Polymarket or Kelsey, in your view, be allowed to live stream a video of a giant roulette wheel and let people trade futures on land on red or black? - Some of these types of gaming, where it's really a game of chance and not a game of skill. There's definitely a difference. And I think when we look at what's a commodity, it's possible that you could construct some sort of contract and that's so character-rivid but really the underlying in a game of skill is very different. It's a clear economic risk associated, for example, with the Super Bowl. It's a good example. There's a ton of economic activity associated with that. There's hotel revenue that comes from it. There's vendors, there's activity within the city, tourism, all of that. And so there's a real reason to hedge that risk with a game of chance. It's harder to say it's possible you can construct something but it's less likely that that's a real underlying. - Well, what is the difference? Because, you know, let's say it's what is bad bunnies first song going to be at the Super Bowl. Like, what is the difference between that which doesn't really seem any more economic than, you know, a roulette wheel and whatever it is? - Well, to be clear, there's no requirement in the act that there has to necessarily be some merit-based result from a contract. I do think with a lot of these information markets, these prediction markets, whether forecasting of potential outcome in the future, they produce a lot of useful information. We are seeing newsrooms incorporate prediction markets. We're seeing sports, live broadcast, and corporate prediction markets. We're seeing the information used in particular. A great example is the election in 2024 where the president had a very large victory and that was not necessarily forecast in many of the polls. But of course, the prediction markets got that right. So it's something that I think is valuable to society. The question of having regulation around that, a separate question, I think that's an important one. We are certainly taking on that task and making sure that we don't let these markets languish or that we don't push them offshore, but we develop the right rules and regulations to develop investor protections and make sure that the markets are flourishing here in the United States. - Since we're discussing prediction markets through the medium of the Super Bowl, and you mentioned players as well, looking at player behavior. If a player were to place a bet on, I don't know, a specific play during the game, and then they did it themselves, like something that they actually have agency over, would that be something that you would investigate or look into? - You know, I think it's all facts and circumstances. So we evaluate potentially to the extent that there's insiders that are involved in the markets. We get that data we're actually talking to a lot of the sports leagues. We're talking to participants in the markets to make sure that we are on top of things, have information about who is able to be participating in these markets, who's not. We do have at the exchange level, the exchanges are really the first line of defense, and they are surveilling the markets. They're doing KYC on their customers, and so that's certainly something we're on top of, and we'd consider and evaluate on a case-by-case basis. - Why isn't trading sports derivatives gambling or betting? Or is it betting? - Well, there really is an interesting history here. So if you go back to the 30s, national grain betting was a thing, right? Then that was considered a national pastime. And so for as long as we've had derivatives markets, we've had these so-called bucket shops, which were these off-exchange markets where people were just placing bets against the house on the future price of a commodity. On the other hand, you had organized exchanges, so the Chicago Board of Trade, later CME, and others had organized markets with market integrity. They had derivative instruments contracts where you actually were in a contract with another person, and then now in our markets, we have a clearinghouse, novading, and standing in the middle of those contracts, but you have a buyer for every seller. With the kind of bookie model, that's not the case, you're betting against the house, and there's a lot of different rules when you're betting against the house. You don't have the liquidity of being able to offset your position or sell out of your position. You're kind of stuck taking whatever the bookie's giving you, and some of the odds are very different. So you're actually facing the odds of the bookie, as opposed to here where the contracts go up and down and value based on actual market activity. And so over time, the Supreme Court actually blocked some of this bucket shop activity by saying, "You can't take the price quotations from the organized exchanges and use them in a bucket shop, but a lot of these bucket shops over the years have now moved into gaming and other things." We're seeing really the same phenomenon where we have casinos and other operations that are operating lawfully under state requirements and regulations, but they don't have the same sorts of controls. We regulate a nearly 500 trillion noional market with the swaps market. We have very stringent requirements and controls around our exchanges, and these contracts reflect that. They go through a very stringent process of self-servocation. They can't be readily susceptible to manipulation. We surveil those markets with police things like insider trading. And so it's a much more robust scheme on top of these markets, much higher stringent requirements. And so I do think we're seeing a lot of parallels between the 30s and 40s and today, but rest assured that we're on top of these markets, and these have the same sorts of investor protections that you would expect in the securities markets and in our futures markets. Out of curiosity, how much of your time is split now between the new stuff, prediction markets, crypto versus the, I guess the old boring futures exchanges? Yeah, old five. Well, our day to day is really the traditional markets. So when we talk about these new markets, many of the incumbents are getting into the space as well. We're seeing more and more of these products offered on our traditional DCMs, but all of these are the same registration category, right? There are some nuances in how they're set up. There's some new action relief that's been given to some of these platforms historically. But this is not, it's not, you know, our day to day bulk of work, that said given that it's new and given that there's so much that it's changing, we have a lot more rulemaking and policy work to do in this space. So I do think it's a big geese because of that, but in terms of the actual size of these markets compared to our, as I said, about $500 trillion or a $0.00 million dollar of the future markets, it's a smaller piece, but it's growing. And I think blockchain is going to really change in particular how some of these existing exchanges operate, how they settle transactions and so forth. And so it's a really exciting time to be in the seat. So I get that there are some market structure differences between a futures exchange on sports versus the traditional house sets, the odds and so forth. But from the perspective of the user or the person who's putting money on the line, like I think most people would say like economically, they're very similar and they're getting more similar because we know that say like the Kalashian Polymarket, they're trying to get into, to do parlays and stuff. So like it's getting closer and closer. And then, you know, people have a lot of concerns about sports gambling and the effect that that has on young people and so forth. National legalization of these, it's effect lowers the age in a lot of states because in a lot of states, the legal age to gamble is 21 and the legal age to trade a futures like 18, I believe. Do you think that's good that we've effected a lower the age to bet on sports? - Well, again, we're not merit regulators where we don't pass judgment on kind of the age requirements in our securities markets and our derivatives markets. We have certain standards that have been upheld. These markets, people are betting on, you know, any number of assets, right? If you want to call that. - Overwhelmingly sports. - I mean, I think that said, you have the ability to make investments in trade options. All manner of securities, all manner of commodities. And so the rules are not different based on being sports or this or that. You know, I think this term betting has been used and thrown about in our securities markets and our derivatives markets as well. And I don't think it necessarily means anything in particular. But the notion is that you're able to make decisions at 18 in our markets and we uphold that Stay by. state some of the standards have set even higher. And that is not something that, you know, I have a particular opinion on. I think that's just the way. - When you say, sir, what do you mean in state by state some of the standards are set up? - Some of the states have flexibility in what they set up for drinking or for, you know, gambling and the like. This is financial market activity. These are not wagers, you're not betting against the house. We have significant overlay from a regulatory standpoint over these markets. And so we're not gatekeeping particular categories of markets, elections or sports and having different standards. That's not how we've typically done things. And so we don't intend to do that in this particular market. - So you're not a merit based regulator, but you are a technical regulator. And as we've been discussing, there's a lot going on, lots of rule making to do, lots of potential enforcement actions. There's a barren story out today talking about how the CFTC apparently has no enforcement officers left in its Chicago office. And you used to have 20, but everyone resigned, it seems. How are you balancing all these new markets which are growing really, really fast and pose some very thorny questions that we've been discussing with more limited resources? - Well, look, a lot of the folks that left, that was before my tenure and certainly, you know, - I'm not blaming you. - It's not, you know, they didn't leave it after I joined it. But no, I think that it's a serious question, right? We've got to make sure that we have adequate staff to police the markets. And we do have a ton of staff throughout the country. And, you know, to the point of our Chicago office, of course, it's important that we have folks within that office, but we don't have a Texas office, we don't have a Florida office. We don't have offices in every state, we have a handful of offices. We've got a critical mass in DC and a number of folks in New York as well. And those are two largest offices. We continue to fill those out. And we would love to have more people in Chicago and, you know, the door is always open for folks that want to come in and work for us. And we continue to build out the ranks there. But we have adequate resources. We have a ton of folks within each of our offices. And we're actually leveraging a lot of the new technologies like AI to make sure that we're surveilling the markets and that we're reviewing things like insider trading and bringing cases where it makes sense. We're also processing applications very quickly. We just processed, I think, in a record time of 200 days, one of the more recent exchange applications. So we're really well staffed, but we're continuing to build that out and make sure that we have good people in the building who are competent and able to make sure that we protect our markets. - So you have the funding to add headcount. And are you pursuing like building out the headcount to need more funding? - Absolutely. So we are actually staffing up. - Okay. - So 100% we're building that out. We have adequate resources to do so. But I want to be clear that we have a very well staffed building and we're very much on top of things with them. These questions are out not enforcing and surveilling. I think there's a little bit of fake news there. We probably should put it up to a prediction market, but I do think that we're on top of things. - So one thing I know about the Trump administration, they are big fans seemingly of cutting costs, cutting spending, streamlining the federal government in some ways and sometimes cutting agencies altogether. This has been a really long-running question in market structure world. But why don't we just combine the CFTC and the SEC? - So everybody's favorite question. - Yeah. - Look, the CFTC and SEC are very different regulators. So the SEC is a capital markets regulator. They're focused on somebody wants to go race capital for a great idea. Other people want to place that capital somewhere. There needs to be some regulation over that. After the Great Depression, there was a lot of chaos in the markets and the agency really was a great answer to that issue and has put a great regime in place to regulate all of that. The CFTC grew up actually at a different time. The original act was in the '30s, but later on the CFTC was established in the '70s. But the purpose of the CFTC is to regulate risk mitigation risk management, very different area. So there are firms that, whether farmers, ranchers, energy producers, now we have data centers in the AI space, but all manner of businesses have a bunch of risks related to the inputs for their business and ongoing operations. And they need to hedge that risk. And there are other predictions that want to supply liquidity into those markets, make markets, or speculate. And the CFTC regulates that. So a very different purpose for the regulator. There's not the same sort of disclosure regime that we have with the SEC. And so it makes sense to have two separate regulators. But what doesn't make sense and what Chairman Hackens and I have been very clear on is the lack of coordination between the agency. So it's coordination, not consolidation. We need to harmonize the two regimes to make sure that there's not inconsistent and incompatible rules and that there's not gaps. So Chairman Hackens has referred to this no man's land between the two agencies where you've got the bodies of all these dead products and services that otherwise could have been if the agencies could just figure out how to coordinate. Security Futures is a great example. We have shared jurisdiction there, but we've really failed to work well together to get that off the ground. And so I think it's really a new day at both agencies where we're intending to work closely together on that. Yeah, this is exactly what I wanted to ask. So I've heard people talk about increased cooperation and coordination between the SEC and the CFTC, basically ever since the financial crisis. And it hasn't really happened or it hasn't happened to the degree that some people would like to see. What's your diagnosis of the actual problem there? And I would love to get into the weeds here. And what does coordination look like between the two agencies? Yeah, I'm in a good position that I used to work for Chairman Hackens. So I think we have a great relationship just getting off for the start. But a memorandum of understanding is something that we've committed to execute and we're looking to execute very soon. And that really set all the ground rules for coordination between the staffs. And so not having that in place, I think, is really hampered the two agencies because sharing information is really important. You need a framework for sharing that information. There's a lot of non-public material that is generated in each building. And so having rules for the sharing of that information is important. Having regular meetings between the staffs and coordination and sharing of market data related to registrants is really important. So if we've got dual registrants, we're collecting our own sets of information. And we're ensuring that they're each complying with these two separate fortresses of rules and regulations. How do we know who's doing what and what needs to be changed? And so having the information is really important. That's the first step. And then the staffs need to come together and figure out how to create substitute to compliance. So certain rules are incompatible on both sides. We need to knock those out or at least have a default choice. One agency versus the other. If you're a broker dealer and you're doing a very minimal amount of commodity derivatives activity, perhaps you should have a primary regulator at the SEC with some CPC overlay to make sure that there's no gaps. So that's an important piece. I think a lot of the general crypto related issues are really calling for joint rulemaking joint work between the agencies because we're seeing in video tokens on chain, not necessarily within the US. But I think now with the DTC, we're going to start seeing a lot more of the tokenization of public equities. And then we're also seeing Bitcoin, Ether, things that are within our territory, trading on chain. And those worlds are going to collide. And then they are, in fact, colliding today. And so having common ground between the agencies figuring out what the ground rules are and making sure that we have similar standards for decentralized finance and for digital wallets at all if that's really important. Because if we set incompatible standards, then it's going to be a real disservice to the market. And that's going to harm all Americans. Kelshi had an ad recently. It said POV is a girl. And it said POV. I was about to be unable to pay my rent. But I got two years of rent through Kelshi's predictions. It's amazing. This seems more aggressive even than the traditional sports betting. And there's all kinds of sports betting ads. And then they have a thing where if you're a problem gambler, call this number, should there be any limiting factor on how aggressively sports these prediction markets should be advertised? Well, that's one point that I think is worth double clicking on in the sense that there are standards for futures commission merchants for brokers within our markets. And some of those standards are-- I'd like essentially the way that the act and the regulations developed where you have a intermediation between the customer and the clearinghouse and the exchange typically in our markets. Now, these no action letters that started around 2000 that were given to some of the prediction markets back then, as well as now other markets cut out the FCM, cut out the broker. And so you had direct to the clearinghouse, direct to the exchange. And that model doesn't have all the same rules and regulations. And so something that we're thinking about is how do we make sure that we have consistent standards across both? Now, I think this question of what sort of marketing and advertising either should be able to engage in is one that we're certainly going to think about. Sorry, just to be clear. There are current rules on, say, a futures broker and how they can market. But when these no action letters were established that allowed the sort of the futures entity itself to offer directly, they didn't have the rules. What are the rules? And would an ad like these-- if a futures broker-- I forget, MF Global or something, they're like, oh, I couldn't pay my rent. But then now I'll never have to work again, because I traded wheat futures. That seems a little weird. that I've never seen an ad like that. I mean, it really is this result of the way that these no-action letters were handed down, as I said many, many years ago, and this kind of regime that we have that really, my view on a lot of this stuff is that we need clear rules of the road. We need to do things through notice and comment rulemaking and actually think holistically about our markets and not focus on these little patchwork, no action letters, which unfortunately has been the rule over many years. And so that's definitely something we're thinking about. We want to set clear standards. We want stakeholders at the table to figure out what these regimes should look like. And I'm not one necessarily to say what the marketing should look like we want to hear from participants as to what sort of marketing they think is appropriate for these markets. But we're certainly thinking about that. And there are different standards. It really is just a result of the that kind of ad hoc way that regulators in the past have gone about establishing exceptions for certain things in the markets. Well, on this note, do you maybe need new classifications? Because it seems like all these different worlds are kind of melding together where you might have a crypto trading platform that's now offering derivatives and other things. And then you have like an old school exchange that is offering essentially bet. So like number go up, number go down. At the moment, I think your registration categories are pretty like standardize. And you have three of them. Is that right? Like futures exchange, swap execution, stuff like that. We've got two many. We've got many more. All right, more than that. So could you create even more to sort of encompass the industry changes that we're seeing? Well, we certainly need to think holistically about what requirements we have on different participants. So these non-intermediated exchanges, and we're also seeing a lot of vertical integration with a single business owning, clearing house and FCM, the broker and the exchange. We're seeing different models where there's the non-intermediated, as I said, we don't have enough CM at all. And then you have all everything in between. And so we need to think about that. We need to make sure there's consistent standards. We don't want a regulatory arbitrage where because you don't have the broker, you're able to do more. Now, the way that these have been set up under no action letters today, they do not allow for any margin. So they're fully collateralized. And so if you go directly to the clearing house as a customer, you're putting up focal lateral. And so that's something as well, where we're seeing more institutional interest in these markets, they would prefer to be able to put up margin and go through a broker or have a model where you don't have the broker at all, but you're able to use margin. So what we're thinking about all these things, it's a really interesting time, as I said, to be thinking about market structure for things that really just probably should have been done many years ago. And for whatever reason, people relied on these no action letters. And really, I guess it was more of an ankle bite at the time and didn't get a full regime. But what we're thinking about all of that. [Music] This is Scarlett Foo. And I'm Paul Swini inviting you to join us for the Bloomberg Intelligence Podcast. 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Subscribe today wherever you get your podcast. I think that the president and his family has in this industry. These are designated contract markets like any other. We've regulated these markets for many, many years for decades. They have some of the most stringent regulatory requirements. As I mentioned, these are nearly $500 trillion dollar in those markets that we regulate. We take it very seriously. We police fraud and manipulation these markets. So I think everybody can rest assured that we are on top of protecting the markets. And we think it's great that there's a broad swath of interest in the markets. But like so for example, when you're figuring out like what is the appropriate level of advertising going back to those Kelsey ads and you're thinking like, OK, like talking to market participants, like who is that? And like how should people feel comfortable that you're going to find that right line again, when the administration has like a very clear economic stake in this industry and having the industry grow? We adhere to the law. I mean, the commodity exchange act is our authorizing statute. We act in accordance with the commodity exchange act and be very strict ethics and government requirements. And as does I think everyone in this administration. So we take off that very seriously. So speaking of Trump, we should talk a little bit more about crypto because it's been having a pretty bad month so far. And I think one of the big hopes of the industry, the clarity act seems to be installed in Congress. What happens if that doesn't go through? Because you've sort of, I feel like you've committed yourself to being, you know, a crypto digital asset friendly regulator in many ways. Well, thanks to the president's leadership, I really do think we're at a critical moment where we've got genius now as law, regulation, my enforcement's done. We've got the clarity act that's really on the precipice. I think there's a few issues that are being ironed out actually as we speak. I know there's a meeting today. I'm more hopeful that that's going to get done. I think that's going to set a really future proof framework for crypto here in the US. We can't allow European countries and others to lead in this area without US involvement leadership. And so we're committed to getting that done. I think we've got a really great bill that's it's almost at the finish line. If it doesn't get done, look, I think there's a lot of authority that the agencies have, but it's important with low per bright and some of the case law that takes a little bit of the agency's discretion over nuances in the statute and puts that back to Congress and the courts. I think it's really important to have more baked into the statute than not. And so we're hopeful that we'll get a statute in place. You know, one of the areas that crypto seems to have been at the forefront of is perpetual futures. And you know, it's very popular. You see like you can get a hundred to one leverage trading e futures on some platforms. Do you see the more use of perpetual perps in sort of traditional finance? Could we have perpetual oil futures at some point? Like could you envision that? Well, right now we're thinking about it in crypto. I think they're real. But like I you know, trade it on chain like all futures. Like again, if we're like, okay, crypto provides the infrastructure. But could you like why not trade an oil perp on chain? Look, if there's demand for these products, it's definitely something that we'll consider and look at right now, the overwhelming demand has been in the crypto space. We've seen some demand in imprecious metals, gold, silver. We have to consider the susceptibility of each contract to manipulation. So there might be unique considerations around a contract that doesn't have a physical delivery date. For example, pork belly is or other things. And that can create issues within the supply and liquidity for the futures contracts. So something we're thinking about we're definitely excited about all this innovation. It's been too long with this stuff is only developed offshore. And we really want to bring it back with clear rules of the road. So it's really important that the US leads and that we set the standard that other countries are going to follow rather than just allow this stuff to flourish offshore with potentially less regulation. You know, as you all know, when you offer into various countries, there's different rules around offering directly in or solicitation, but reverse solicitation, and then we're going to have to do that. So we're certainly aware of that. We're thinking about it. We want to set really clear and kind of best in class standards for US markets. Just going back to prediction markets. I know you keep emphasizing that you're not a merit based regulator, right? So you're not making decisions on what people should be betting on or what they can bet on. But is there like, is there a line at some point that you wouldn't want to see actually cross like if someone creates a contract for like someone's going to die, right? A violent death or something? That would seem problematic. Or a contract that this came up when we talked to Don Wilson, the Chicago contract for whether people would throw sex toys onto the court during a WNBA game, which of course, the existence of the contract, right, elicit people to do it, change their behavior, also kind of dangerous. Like, where's the line? The latter seems highly at risk of being susceptible to manipulation, which we do have authority to reject. I think with other categories, assassination and the like, there is authority within our statute to prohibit. So we would exercise that authority. There are certain areas where we certainly would not want contracts being offered. But with others, look, we're not, as I said, a merit regulator, we're not going to go and say, You can't have a contract in sports. You can't have a contract in politics, but the details matter. And we are evaluating that. Just going back to this sort of basic question. A lot of states, attorneys general, are attorneys general? Did I say that I pluralized the attorneys general? Attorney general. A lot of states, attorneys general, there's a lot of court fights about this. And they look at this and like many people would and they say, look, this is betting. This is gambling. This certainly looks like sports gambling. Mostly itself ran ads that said sports betting is now legal in your stay and I think they've pulled those back, et cetera. But from the perspective of the public, it certainly looks like by putting sports betting into this framework that it's undermined the ability of states to like set the rules about who can bet on one. Well, there's a great law journal article by professor He's and he's a securities law professor. This must have been written in the early 2000s, but it was before the financial crisis. Comparing derivatives, futures contracts, securities, insurance products, gambling, these are all products that you can take similar economic positions in, but they have different legal treatment. And it's because the products are structured different ways. So an insurance contract could be structured very similarly to a credit default swap that you have an insurable interest. So the details do matter and we are looking at that. So it's not the case that we're going into the casinos and saying you're offering legal off exchange swaps, but if the products are structured as swaps, then we have authority there. And so many of these platforms that are offering products that may have some similar economic attributes, but the details do matter, right? As I mentioned, you have to go through a clearinghouse. The products can be offset. You can get in and out of your position. There are different decisions. Do they matter? I totally get that. But do they matter from the perspective of like a 19 year old who's addicted to betting on sports? I think that's a question for society as a whole and even for Congress, right? I mean, to the extent we don't want a 19 year old trading and video stock options either, you know, that's something that you can talk to Congress about. But the reality is that today we allow 18 plus in our financial markets. And there's responsibility associated with that. They have to go through a broker in many cases. There is this nuance of the non-intermediated model, but there's screening as well to be able to access those markets. And so we do have standards, we do have rules, everything's done in accordance with the exchange rulebook. And we enforce that. And we are policing those markets. But I think this more, it's a realistic question of what age should be the age to be able to participate in the markets. These people can be drafted, go off to war. And so a question of whether they can trade options on, you know, the outcome of the Superbowl, you know, I think that's not really for the regulator to decide. You know, you said you were ramping up staffing to help regulate all these new markets, new and fast growing markets. What's the hiring process or the hiring experience actually like at the moment because, you know, thinking back to last year, 2025, all the headlines when it came to government employment were, you know, layoffs, mass firing, streamlining. What's that like for you now? Is it easy to get people in the door? Well, look, there are, to the extent there are areas where we need additional staff. We are evaluating based on competence and the highest quality. We do not want to just bring on bodies, bring on bodies. We're making sure that we're bringing on the right people for the rules. And in many cases, we are very well staffed. I think there are some needs that we're looking to fill out. But again, it's, it's very much akin to hiring in a private company. We're looking to bring on the best and the brightest who really want to help revitalize the agency, fill out needs for the agency. And we are, as I mentioned earlier, relying a lot on technology as well because there's just so much that many years ago really had to be done manually. They can be done very quickly through new technologies. Well, this has been a perennial question, which is how government agencies actually compete with the private sector to get good people. How are you doing that at the moment given that, I mean, I imagine you have some form of budget constraint. And I would imagine that it's probably your budget is not as big as like, I don't know, CMEs or something like that. How do you actually compete? Well, look, I think part of that's the mission. We are really interested in making sure that these markets flourish here in the United States. It's an exciting time. Many people are interested in being able to contribute to that effort. Or really, as I said earlier, setting new market structure for this asset class as well as for blockchain-based markets. And a lot of the things that needed to be fixed in the wake of Dodd-Frank that frankly were never fixed. So I think it's in part mission and part people that are willing to serve and come in and maybe they don't get the salary that they get in the private sector. But that's not necessarily a bad thing. They get a lot of value out of being working for the government. Come back to the question of marketing and again, gambling marketing. There's always some line or whatever about people who get addicted. Would you like Congress to come in and create rules? Should Congress come up with a rule about prediction market advertising? We have got a lot of authority to regulate our participants. I think there's sometimes a real need for Congress. Maybe to the extent you, as you all mentioned, if you really want to set some more paternalistic rule around, you have to be 21 to participate in the markets. That sort of thing, sure, you can talk to Congress about, with respect to the more nuanced pieces of how we regulate the markets, that stuff that we handle. It's not typically baked into statute. We go through our notice and comment process and get input from the public on those sorts of things. So I don't necessarily think you need to kick everything to Congress within the details, but it certainly could be something that people. A lot of countries, sorry, a lot of states regard, like, okay, under 21, we don't want that, right? And it sounds like you regard that as paternalism in action, which I understand a lot of people share that view. But it also seems like the CFTC, people have different views. And it sounds like the CFTC is sort of undermining a value that a state might have about gambling. I don't view it that way. I do think our derivatives markets are a separate area within government and within the law, as opposed to the state gambling. And the rules and requirements that govern a state casino are very different. They can do a lot different things than what a regulated futures exchange can do. And so I do think there's some give and take, some for sure, limitation on the age piece. Look, you can serve alcohol on the casino and allow people to bet on sports. You can't do that necessarily at a digital exchange. Maybe somebody's got a beer on the side. But I do think there's a lot of different restrictions in a different environment in which people are trading, so it's not quite apples-dabels. Mike Sealy, thank you so much for coming on to Adelaide's. Perfect guest at the perfect time. Thanks for having me. I enjoyed that conversation. Me too. However, there are a number of difficulties with regulating prediction markets. And I'm kind of trying to zoom in on what I think might be the primary one. So number one, the CFTC exists to regulate risk management, right? Which is what Mike said. It is very doubtful to me that someone needs to manage their exposure to Cardi B performing on stage at the Super Bowl. So it's not even entirely clear to me that like this is an industry that the CFTC should be regulating. Now, that said, that's a big tension, right? And then just beyond that, you could certainly argue that by legitimizing prediction markets and helping them to grow, in fact, introducing a new risk into the system because everyone's going to start gambling away, I don't know, their college funds or whatever. You know, I think Mike made an interesting observation sort of near the end of the conversation that like, and it's really true, like different market structures warrant different types of regulatory treatment, right? So and I think that makes sense. I think what's interesting though about this conversation, particularly as it relates to sports betting is that part of the reason that states have sort of, in many cases, either no sports betting or very stringent rules about who can engage in sports betting has nothing to do with financial risk and everything to do with the sort of like moral choice about who gets to sports bet. And so, you know, on one hand, it's like, okay, there's like traditional sportsbooks. They have a house that sets the odds. Definitely true, the prediction market companies have like a different market structure. But from a sort of like, why does society want to constrain the role of sports betting? It's not because of like any sort of like financial instability risk. Right. Because we don't want certain people like 18 year olds, people who might still be in a high school having access to sports betting. And when the CFTC says like, you know, this is, this is a new type of financial instrument that should be regulated like a financial instrument is sort of undercuts that sort of choice that the state has made. Yeah, exactly. Do you think sports betting is like the new monoculture? It is really incredible how pervasive it is. And it's really incredible. But also it's just incredible, you know, truly how pervasive betting on everything is. And you know, I should say like, I'm an enthusiastic consumer of the prediction market's data. You know, like I said, in the very beginning, like I, now when I all kinds of things, including Fed decisions. I think it's very useful to say, you look at certain measures of the Fed fund swap. Why would you just look at Warp? I love Warp, too, but we have it on the Bloomberg now. Probably market will there be three rate cuts this year. That is also a useful instrument to have, but there are a lot of things that prediction markets have. Again, that A aren't that, but I like a lot of them. I like looking at election odds. I like looking at whether the odds of some company, what they're guys, I think there's a lot of useful signal from them. It's also true that the platforms are largely sports betting at this point. Right. How much signal do you actually need about, I don't know, the Super Bowl? I'm sure some people are really into it, but from a trading perspective. From a sort of financial regulation standpoint, it's a different question. Anyway, and it's also true, by the way, that the Trump family is very invested quite literally into this space. I think that quite reasonably should raise some questions about how policy is being made about the growth of this industry. Incentives, for sure. Shall we leave it there? Let's leave it there. This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway. And I'm Joe Weisenthal. You can follow me at the stalwart. 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