U.S. CFTC's Selig says AI has helped make up for staffing cuts at key crypto watchdog

Selig's Democratic predecessor, former Chairman Rostin Behnam, had routinely argued that the agency would need more people to oversee crypto and didn't have the resources to police the world as prediction markets spread in depth and in a virtually unlimited breadth of contract topics. During Selig's brief tenure, the prediction markets have erupted in accusations of insider trading, a few of which have been addressed by the firms themselves. But the markets have drawn heavy scrutiny on certain trades around U.S. military actions and government statements that suggest small numbers of anonymous traders made significant money on correct bets, suggesting the potential for insider trading from people with government insight.

The chairman acknowledged "numerous investigations ongoing" in prediction markets, though he wouldn't quantify a number or discuss their focus. He said the regulated platforms are the first line of defense against insider trading, fraud and market manipulation in the hundreds of new markets (binary event questions) that emerge every day on the platforms, while the CFTC itself is a second line of defense.

"We regularly reject contracts," Selig noted. "We're actively reviewing what's out there," he said, adding that his agency has a "zero tolerance" policy for illicit market activity.

"Anyone who engages in that behavior will face the full force of the law," he said.

But Representative Angie Craig, the committee's top Democrat, argued that "the agency's workforce is stretched too thin," especially considering the agency's role as the "primary regulator of two of the fastest growing and most volatile markets."

"We must give the CFTC the staff, the funding and the clear statutory authority it needs to do its job," Craig said.

The personnel declines at the regulator includes the commission itself, which is supposed to have five members under the law — including two commissioners from the minority party — but which has been left by the White House as a solitary posting of Selig. The chairman was questioned repeatedly about that during the Thursday oversight hearing, including whether he'd proceed with major rules as a one-person commission.

"We cannot for the sake of the American people slow down our rulemaking," he said, suggesting he'll move alone on new regulations. The CFTC is pursuing a preliminary rule process to set up guardrails for U.S. prediction markets, and Selig has also pushed policy initiatives in crypto.

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