Commodity Futures Trading Commission (CFTC) Chairman Michael Selig said the U.S. derivatives regulator will not decide which products market participants should be allowed to trade, outlining an enforcement approach centered on fraud and manipulation rather than setting policy through lawsuits.
Speaking at the FIA Global Cleared Markets Conference in Florida, Selig said the agency intends to step back from what he described as enforcement-driven policymaking.
“The CFTC is not a merit-based regulator – we do not decide what people should be able to trade,” Selig said. “Nor are we going to regulate through enforcement.”
The comments signal how the new Chairman plans to approach oversight of derivatives markets as the agency reassesses several policies adopted in recent years.
Enforcement Focus Shifts Toward Fraud and Manipulation
Selig said he has instructed the CFTC’s enforcement division to focus on traditional priorities such as fraud, market abuse and manipulation.
“What we will do is ensure that there are purpose-built rules of the road that protect customers and catch fraudsters who would otherwise cheat the system,” he said.
[#highlighted-links#]
The Chairman said the agency should not use enforcement actions to create policy for new markets or emerging financial products. Instead, he said regulators should write formal rules through standard rulemaking processes.
The approach contrasts with a regulatory style that many industry participants have criticized in recent years, particularly in digital asset markets. FinanceMagnates.com previously reported on growing industry expectations that the CFTC under new leadership could adopt a lighter enforcement stance toward crypto-related activity, an approach sometimes described as “more crypto, fewer cops.”
Prediction Markets Return to Regulatory Spotlight
Selig also addressed the role of event contracts, commonly known as prediction markets, which allow traders to bet on the outcome of political or economic events.
He said the CFTC will issue guidance on how such contracts can be listed and traded under existing law and plans to launch a rulemaking process to gather industry feedback.
“The CFTC has regulated prediction markets for decades,” Selig said.
He added that the agency intends to defend its jurisdiction over these markets amid ongoing legal disputes with several U.S. states.
The regulator recently filed an amicus brief supporting one of its registered platforms in litigation related to prediction markets.
Climate Initiatives Scrapped as Agency Resets Priorities
The Chairman also announced that the CFTC will dismantle several climate-related initiatives launched in previous years.
The agency is eliminating the Climate Risk Unit and disbanding a subcommittee that focused on climate-related market risks. It is also withdrawing a request for information on climate-related financial risk issued in 2022.
“We remain focused on our core mission, not political pet projects,” Selig said.
According to the Chairman, the CFTC’s statutory mandate centers on market integrity, price discovery and customer protection rather than environmental policy.
Leadership Changes Signal Policy Reset
Selig took over as CFTC chairman earlier this year after a career that included work in both the private sector and government. His appointment followed several other leadership moves inside the agency.
FinanceMagnates.com previously reported that the new Chairman had led the Securities and Exchange Commission’s crypto task force before moving to the derivatives regulator, a background that some market participants interpreted as a signal of regulatory changes ahead.
His arrival also followed a series of personnel shifts at the agency, including the appointment of several senior officials with backgrounds in intelligence, banking and Capitol Hill.
Derivatives Oversight Faces Structural Questions
Beyond enforcement policy, Selig used the speech to criticize parts of the regulatory framework created after the 2008 financial crisis.
He argued that the implementation of the Dodd-Frank Act introduced complex reporting requirements and compliance costs that contributed to consolidation among futures commission merchants and limited access to hedging tools for smaller firms.
The CFTC, he said, plans to review several rules affecting capital requirements, reporting obligations and swap trading.
“Our responsibility is to provide clear, workable regulations,” Selig said. “Your job is to comply with them.”
He also said the agency will rely less on temporary regulatory relief – such as no-action letters – and instead address structural issues through formal rulemaking.
Digital Markets Continue to Shape Agenda
Although the speech focused heavily on derivatives regulation, Selig also referred to developments in digital asset markets and other emerging technologies.
The Chairman recently said that crypto perpetual futures could soon be available in the United States, suggesting that regulatory clarity may arrive within weeks.
In his conference remarks, Selig argued that regulators should allow new financial technologies to develop without excessive oversight while maintaining safeguards against fraud and market manipulation.
“Markets that work well are truth machines,” he concluded.
