"CFTC Reauthorization: Stakeholder Perspectives"
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House Agriculture U.S. House of Representatives
Follow its sittingsSpeaker 1
Our third witness today is Miss Alicia Crichton. Miss Crichton is the managing director, global co-head of futures, and the head of OTC and prime clearing at Goldman Sachs, as well as the chair of the futures Industry Association. She is testifying on behalf of the Futures Industry Association today. Our next witness today is Mister Rob Schwartz, former general counsel at CFTC. He is currently a partner at Morgan, Lewis, and Baucus.
And our final witness today is Mister Benjamin Chiffren, the director of securities policy at Better Markets. Thank you all for joining us today, and we'll now proceed with your testimony. We each have five minutes. The timer in front of you will count down to zero, at which time your time has expired. Commissioner Stump, please begin when you're ready.
Speaker 3
Thank you. I would like to begin by thanking Chairman Thompson and Ranking Member Craig for inviting me to be here today. And I would like to applaud all of the members for your attention to reauthorizing the CFTC. As a former staffer, I'd also be remiss if I didn't acknowledge the tremendous amount of work the staff has put into making this hearing a possibility today. Since it began operating 50 years ago, the CFTC has fostered tremendous growth and integrity in the U.
S. Derivatives markets. While this success is driven by the market itself, it is sustained by the unique regulatory purpose Congress designed for the CFTC, a purpose that needs to be reaffirmed from time to time, lest it be misunderstood or undervalued. While the CFTC's mission remains timeless, sweeping and substantial changes in the derivatives markets have taken the agency on quite a transformative journey. I am proud to have been part of this progression, first as a legislative staffer at both the House and the Senate Agriculture Committee, where I worked on the last CFTC reauthorization in 2008, and the Dodd Frank Act during the financial crisis.
I've also had the opportunity to work within the industry for a variety of CFTC-regulated entities, and I count among my greatest honors serving as a CFTC commissioner. In each of these roles, advancing legislation, conducting oversight, implementing regulation, enforcing rules, and developing compliant business operations in the real world, I have confronted many complex questions, often stemming from the competing and sometimes very creative interpretations of the objectives Congress has outlined for the CFTC. Time and time again, I find that the best compass in navigating these difficult and subjective debates is simply rereading the actual words in the Commodity Exchange Act. To be clear, there have been many times when I wish the words said something different, but the CEA, the Commodity Exchange Act, is the ultimate directive to which we all must subscribe. And the reauthorization process has traditionally served as a recurring opportunity for Congress to ensure that those all-important words in the Commodity Exchange Act remain absolutely fit for purpose, such that market developers, regulators, and where necessary, the courts can apply the statute in a current context.
While the sensible flexibility of the Commodity Exchange Act largely enables the CFTC to adapt as the markets develop new products and business practices, reauthorization provides an opportunity for this committee to address ambiguities that inevitably arise with such changes. Beyond this periodic review of the Commodity Exchange Act and ensuring that it remains up to date, I would like to briefly discuss two additional reasons reauthorization is prudent. One is a technical, budgetary matter and the other an important validation of the agency itself. Beginning with the technical issue, it is worth briefly clarifying what we are talking about when we use the phrase CFTC reauthorization. Importantly, the duties and authorities assigned to the agency do not lapse at the end of an authorization period.
Rather, the authorization for appropriations expires. This is not unique to the CFTC, and in a much broader debate, there is a great deal of scrutiny surrounding such unauthorized appropriations. In my opinion, the best course of action to avoid the CFTC being inadvertently caught up in this broader procedural debate is simply to authorize the appropriation. This is CFTC reauthorization in its simplest form, changing the end date to extend the time frame for which appropriations are authorized for the agency. In addition to updating the Commodity Exchange Act and addressing this technical budgetary matter, Congress has historically taken the opportunity to demonstrate and renew its support for the CFTC by way of reauthorization.
This is not, as some have suggested, merely a symbolic gesture, but rather an important affirmation of the agency's distinct relevance. Though small in size, the CFTC performs a critical regulatory function overseeing markets with an enormous range of underlying products. Agricultural commodities, energy resources, interest rates, foreign currency, metals, credit tools, and equity indexes, just to name a few. Its remit impacts grain elevators, hedge funds, financial institutions, manufacturers, supply chains, and retail participants in both existing and newly developed derivatives markets. CFTC's regulated markets have an enormous impact on the U.
S. Economy. Yet, its identity is often misunderstood as, and I quote, the little sister of the Securities and Exchange Commission. It's important that Congress endorses the unique objectives it set out for the CFTC to avoid these sorts of misconceptions, especially now, during the current period of transition. In closing, I would again just like to thank you all for your attention to reauthorizing the CFTC.
I think it's an important endeavor, and I would be happy to answer any questions.
Speaker 1
Commissioner Stumpf, thank you so much for your testimony and your service. Mister Prosser, please, begin when you're ready.
Speaker 4
Chairman Thompson, ranking member Craig, and members of the committee, thank you for inviting me here today to testify about the importance of the CFTC and the committee's oversight and reauthorization of the agency. I am Ed Prosser, senior vice president of special projects at Schuler. Schooler is an employee-owned $7,300,000,000 agribusiness and supply chain company with headquarters in Omaha, Nebraska. Founded over 130 years ago, our company buys, sells, stores, handles, and processes grain and ingredients through our global networks and expertise in trade and transportation. Our US grain facility networks include locations in Illinois, Iowa, Nebraska, Kansas, and Missouri.
We employ over 1,200 people in more than 100 offices and facilities worldwide. I have been an active participant in physical and derivative markets in agriculture and energy for 40 years. I serve on the board of the Commodity Markets Council, the National Oil Seed Processors Association, and as a member of the CFTC's Agricultural Advisory Committee. I also formally served on the risk management committee of the National Grain and Feed Association and was a member of the Minneapolis, Chicago, and Kansas City Board of Trade. Today, I'm testifying on behalf of the Commodity Markets Council, founded over 90 years ago and originally called the National Grain Trade Council.
CMC is the leading Washington DC-based trade association that brings agriculture and energy traders together with commodity exchanges. Its members include end users that utilize futures and swap markets for agriculture, energy, metal, and soft commodities, as well as designated contract markets, futures commission merchants, and swap execution facilities. CMC advocates for open, transparent, and competitive markets. For decades, we have supported both the principled regulation of and responsible innovation in clearing in derivatives markets. I firmly believe my testimony today reflects the views of thousands of end users, farmers, merchants, utilities, energy suppliers, biofuel producers, and manufacturers who rely on US derivatives markets as critical risk management tools, not for speculation, but as a central part of their everyday business operations.
The derivatives markets are just that. Derivatives of cash markets that trade every workday to provide the food, fiber, energy we rely on. The derivatives markets provide liquidity to ensure efficient price discovery, which allows participants around the world to signal which commodities are scarce and which are oversupplied. Specifically, these markets enable commercial users to hedge exposures to volatile price movements driven by weather events, global economic shifts, supply chain disruptions, and geopolitical instability. US agriculture futures contracts, corn, soybeans, wheat, livestock, cotton, and more serve as global price benchmarks used in risk management by businesses here and around the world.
These functions are not just theoretical. They are vital to the real-world business of producing and transporting agricultural goods to the consumers that depend upon them. From the price of milk and bread to the cost of gasoline and electricity, derivative markets shape our economy, ensuring that commercial participants can manage risk, avoid catastrophic losses, and deliver reliable value to consumers. The role of price discovery, risk transfer, and market liquidity is the pillars of healthy, resilient markets. With this in mind, I'd like to provide six recommendations for congressional action and refer you to my written testimony, which further explains each of these and why they are critical.
1. Support the appropriate funding and staffing for the CFTC, enabling the agency to keep pace with market growth, technological complexity, and global competitiveness. Two, ensure that regulatory standards prioritize the needs of commercial users, end users, and consumers, not just financial intermediaries, new market entrants, or speculative interests. Safeguard the three principles. Safeguard the principal-based regulatory model that has enabled responsive innovation and reasonable flexibility in responding to new market challenges. Four, maintain bipartisan commitment to transparency, public participation, and open debate in regulatory decision making.
Five, encouraging ongoing review of market structure proposals such as event contracts, clearing organization changes, and customer bankruptcy protections, to ensure that any market structure changes do not undermine our agriculture and energy markets. Markets. And six, anchor global benchmarks in U. S. Markets subject to U.
S. Oversight and rules, strengthening America's competitive position for the benefit of American producers, consumers, and communities. Thank you again for the opportunity to represent and comment on behalf of the Commodity Markets Council and all commercial users of these agricultural and energy contracts. We hope you will submit a fully funded, excuse me. I hope you will support a fully funded and fully functional CFTC to ensure that our producers, merchants, and end users continue to fuel, feed, clothe, and clothe America in a growing market.
Thank you.
Speaker 1
Mister Price, thank you so much for your testimony. Miss Graydon, please begin when you're ready.
Speaker 5
Thank you. Good morning, Chairman Thompson, Ranking Member Craig, and members of the committee. Thank you for the opportunity to testify. I'm the head of the global clearing businesses for Goldman Sachs and the co-head of its global futures business. I'm testifying today as chair of the Futures Industry Association, the leading global trade organization for the futures, options, and centrally cleared derivatives markets.
There is tremendous change facing the clear derivatives markets today, especially when compared to 2008, when the CFTC was last reauthorized. FIA strongly supports the reauthorization of the CFTC as it reinforces the agency's mission in safeguarding markets critical to the global economy. I've had the privilege of interacting extensively with the commission over many years through the FIA. On behalf of Goldman Sachs and as the chair of the CFTC's market risk advisory committee, I believe that with adequate resources, it is well suited for the challenges ahead. FIA supports innovation and believes there is tremendous potential for technology to benefit all market participants.
We also believe there are valuable and time-tested risk management traits of our current market structure that can play an important role in the integration of traditional and novel products and platforms. When risk management goes hand in hand with innovation, it helps to ensure the broadest participation across retail, end users, and institutional investors. It is to this end that I would like to highlight important recommendations we hope the committee and the commission will consider. First, many of the safeguards that exist in the markets today are behind the scenes, but critical to customer protections and market stability. Futures Commission Merchants or FCMs are risk managers that act as the first and last line of defense in the clearing system and prevent losses from triggering a domino effect that can threaten the stability of markets.
FCMs are CFTC-regulated intermediaries that stand between end users and the clearinghouses, safeguarding customer assets, monitoring for money laundering, and providing substantially all of the financial resources in the default funds that backstop these clearinghouses. To the degree trading platforms offer direct access models, the CFTC should consider whether the regulatory environment may also need to evolve to safeguard markets and market participants, particularly as retail investors are provided direct clearing access on a leveraged basis. In 2023, I testified before this committee regarding volatility in the commodity derivatives markets and how end users can be better prepared to weather market turbulence. I also highlighted how they are finding it harder to secure and sustain capacity from their FCMs to clear. I suggested two solutions that remain necessary today: adequate clearinghouse margin levels and a well-calibrated bank capital regime.
I elaborate on these points in my written testimony, and would be happy to discuss them further today. Perhaps one of the most notable changes in the CFTC's mission over the last 20 years is that it may now oversee significantly more leveraged retail investor trading volumes than ever before. FIA supports efforts underway by congress to clarify and strengthen the CFTC's authority over digital commodities to help ensure retail investors are protected. But FIA also recommends that Congress authorize the CFTC to issue rules or guidance to require that financial resources used to manage the default involving leveraged retail transactions be segregated from other default resources in the clearinghouse. Such separation could mitigate systemic risk concerns.
Next, FIA supports provisions in the Clarity Act intended to ensure risk offsets are recognized across both traditional and digital asset products that span CFTC and SEC jurisdiction. Recognizing such offsets will incentivize hedging activity, while promoting harmonization between both agencies. Similarly, FIA supports provisions in the Clarity Act to authorize the CFTC to carry out a rulemaking to mitigate potential conflicts of interest for vertically integrated market participants, and ensure retail investors remain protected. Rulemaking should establish requirements for the identification, mitigation, and resolution of these conflicts as they may arise in the context of vertically integrated market structures. Finally, FIA supports inclusion of the Griffin Fix as it is designed to strengthen customer protections and bankruptcy proceedings involving FCMs by ensuring customers have priority if there is a shortfall in segregated funds.
FIA believes there is broad stakeholder support for this provision. FIA greatly appreciates the committee's interest in these topics that affect the global derivatives markets. It is an honor to be with you today, and I look forward to answering your questions. Thank you.
Speaker 1
Miss Grain, thank you so much for your testimony. Mister Schwartz, please begin when you're ready. Thank you. Excuse me.
Speaker 6
Good morning, Chairman Thompson. Ranking member Craig, members of the committee. I am Rob Schwartz, a partner in the futures and derivatives practice at Morgan Lewis and Bockius. But more importantly, for today's purposes, I spent 13 years at the CFTC, including most recently as its general counsel. I had the privilege of being involved in some capacity in most major issues before the commission for over a decade.
I'm also the grandson of a farm girl. Years ago, my family owned a dairy farm with about five dozen cows in Southeast Brooklyn, if you can believe it, just a few minutes from what's now JFK Airport. I looked this up with the state's department of agriculture, and there is now just one farm in all of New York City, and it grows salad greens and wheatgrass in shipping containers. My point being that things change, and things are changing for the CFTC too. New products, new technologies, new market participants, and soon, new leadership.
It's the right time to take a fresh look at the statute, the Commodity Exchange Act, and so I thank you for your work and the opportunity to appear before you. Okay. Now the disclaimer: the views I share are my own and do not represent those of Morgan Lewis, my colleagues, our clients, or any other person or organization. Okay. Onward.
The CFTC is a special agency, and I want to highlight three aspects of that. First, the CFTC is a deliberative, bipartisan body in the truest sense. Of all the experiences I had during my service at the agency, some of the most interesting were the times I got to sit behind closed doors with generations of commissioners, while they deliberated on critical issues. Democrats and Republicans of good faith would debate, sharpen their thinking, compromise, and sometimes even change their minds. I think if the American people had visibility into that like I did, they'd be pleased with what Washington is capable of.
This is a technical field, and partisanship should not and typically does not dictate how the CFTC executes its mission. And I can tell you that most people who work at the CFTC do not care if it is led by Democrats or Republicans. They look for leadership, expertise, and problem solving, and they do their work with the same dedication, no matter what. Second, the commission, when it is at full strength, possesses a wealth of knowledge. Congress designed it that way.
The CEA directs the president to nominate individuals with, quote, demonstrated knowledge in futures trading or regulation or of one or more of the commodities covered by the statute, and seek to ensure balance in those areas. It's a tall order. The CEA definition of commodity, as you probably know, covers anything that underlies a futures contract, which means it covers assets from cotton and grain to oil and gas, raw materials, precious metals, interest rates, credit indices, exchange rates, and now cryptocurrencies. But while achieving that balance is hard, presidents of both parties have succeeded. Commissions I served under included experts on agriculture, energy, financial products, international business, digital assets, and on.
Same is true with the agency staff. CFTC economists, technical experts, lawyers, and others have degrees in everything from law and government to math and the hard sciences. They include experts in fintech. They come from rural and urban backgrounds. Many have served in the military.
Together, they have a level of skill, knowledge, and discipline worthy of the agency's mandate. That matters because there may be no other agency that touches so many areas of the economy. As former chairman Tarbert put it, the CFTC is the most important regulator most Americans have never heard of. Third, and I think because of points one and two, the agency is very effective. The commission's oversight has helped to ensure that our derivatives markets have functioned smoothly in good times and bad.
I'm thinking of the collapse of MF Global, the disruptions of COVID-19, the war in Ukraine, and the fraud at FTX where the CFTC-regulated subsidiary continued to function as normal, and the division of enforcement held the wrongdoers to account. Americans should feel confident that the most important little agency they've probably never heard of is on the job. I'll end by saying that as impressive as it is, the CFTC can only be as strong not only as its members and staff, but as the Commodity Exchange Act itself, which has made the US the global gold standard for derivatives regulation. But old statutes are like old friends. You should visit them from time to time.
It's important that Congress periodically inspect the machinery to ensure that it's equal to the task today and adaptable for the future. These are times of change, and as we sit here, they are probably lurking in labs and laptops around the world, the seeds of new products and technologies we can't imagine, but that the commission will someday contend with. Reauthorization is an important part of making sure the agency is always equipped to carry out the mission. So, again, I thank the committee for its work and for the opportunity to assist in any way I can.
Speaker 1
Mister Schwartz, thank you so much for your testimony. Mister Schiffrin, please proceed when you're ready.
Speaker 7
Good morning, Chairman Thompson, Ranking Member Craig, and members of the committee. Thank you for the invitation to testify today. My name is Ben Schiffrin, I'm the director of securities policy at Better Markets. Better Markets is a nonprofit, nonpartisan, and independent organization founded in the wake of 2008 to promote the public interest in the financial markets, support the financial reforms of Wall Street, and make the financial system work for all Americans again. This year marks the 50th anniversary of the creation of the CFTC.
Its fifty-year history demonstrates that the agency is deeply rooted in and skilled at supporting producers in our agricultural markets, but also capable of responding to new and emerging issues in the financial marketplace, but only if given the appropriate authorities and resources by Congress. When Congress fails to provide the proper support for market oversight, novel products emerge and gaps develop, and even a willing and able CFTC is unable to meet the moment. When this happens, it leads to disastrous consequences for investors, customers, producers, and the wider economy. A CFTC that has the appropriate regulatory authority and resources is critical because the CFTC's core mission is of vital importance. The agency polices the integrity of derivatives markets in order to help producers like farmers, ranchers, and manufacturers hedge risk and develop accurate prices for their products.
The CFDC is responsible for the essential functions of providing relevant information to the public, preventing fraud and trading, and curbing financial speculation unrelated to the natural supply and demand. These functions matter to every American because they impact the price of everything from the cereal they eat at breakfast to the bread they need for school lunches, to the gas in their cars to get to work, and the oil that heats their homes. At a time when all Americans are fighting to make ends meet and suffering from an affordability crisis, it is critical that the CFTC focus on its primary mission to ensure that those everyday commodities are available to the American people in the right amounts, at the right time, at the right and fair prices. Unfortunately, the CFTC has strayed from its core mission. The agency now seems to be spending all of its time on the crypto markets.
From a sheer market size perspective, this focus represents a mismatched use of resources. While the global crypto market is estimated to be just over $3,000,000,000,000, the CFTC separately is responsible for overseeing $380,000,000,000,000 in notional US swaps and futures contracts. Being the leading promoter of crypto is a distraction for the CFTC that the American people simply cannot afford. The CFTC is also taking on significant new responsibilities it is ill-equipped to handle with prediction markets. Better Markets has been warning for years that prediction market platforms are trying to thwart state and tribal laws by asserting that the event contracts they offer on politics and sports are not, in fact, gambling, despite the fact that they let people bet on elections and sporting events.
These efforts have accelerated in recent months and threatened everything from the CFTC having the bandwidth to police traditional markets, to consumers losing the protections they deserve. The CFTC's focus on crypto and prediction markets is especially problematic for its ability to fulfill its core mission, because the agency is already underfunded and understaffed. The agency has only been funded by congress at its requested level twice since fiscal year 2006, once in fiscal year 2021 and once in fiscal year 2023. And it is forced to oversee the 380,000,000,000,000 in notional US swaps and futures contracts, with a budget of just 365,000,000. Reporting from Bloomberg also indicates that at least 15% of staff have been shed since the beginning of the Trump administration.
Yet new areas of oversight, such as crypto and prediction markets, will require not only the addition of new staff, but also new data metrics and surveillance tools. The sheer lack of commissioners serving at the CFTC and its absence of bipartisan leadership further exacerbates the agency's difficulties with fulfilling its core mission. The CFTC has been led by one commissioner in an acting chair capacity since September 2023. If the CFTC was designed to be a five-member bipartisan commission, the need for a full bipartisan commission is heightened during a time when policymakers are considering significantly expanding the jurisdictional reach of the agency. The agency should not move forward with future rulemaking or guidance efforts until the CFDC has both a permanent chair and robust bipartisan representation among the commissioners.
Thank you, and I look forward to your questions.
Speaker 1
Mister Schiffman, thank you so much for your testimony. At this time, members will be recognized for questions in order of seniority, alternating between majority and minority members, and in order of arrival for those who joined us after the hearing convened. You'll be recognized for five minutes each, in order to allow us to get to as many questions as possible, and I recognize myself for five minutes. Miss Crichton and Mister Prosser, as I mentioned in my opening statement, this is a time for transformation in financial markets. As market professionals, what big derivatives, public policy issues do you see coming down the road in the coming years?
Speaker 5
Good. Thank you for the question. As I mentioned in my opening comments, there are a few areas that we're focused on. One is, I think, the possibilities that this transformational technology provides to the industry at large. And we think the appropriate balance of that technology, along with a good, strong policy framework, is incredibly important to pave the way for a strong, safe, and healthy ecosystem.
In terms of areas that we focus on both in our current markets as well as the possibilities forward, areas that we're particularly worried about continue to be margin. That acts as the first line of defense, whether it's existing markets and traditional markets or what, kind of the new and digital markets present. The adequacy of margin levels is incredibly important. We worry about the amount of clearing capacity in the ecosystem. At the moment, there's capacity is quite strained.
And with new products coming to market, whether it's the treasury clearing mandate, the repo clearing mandate, there's significant demand for additional clearing capacity. And we think about kind of the nature of bank capital regulation on us providing that capacity and continuing to intermediate in these markets. The impact of that on end users is incredibly significant. I'll hand it over to Mr. Prosser.
Speaker 4
Thank you. In the 40 years that I've been involved in these derivative markets, I don't know that there's any time that we've had the pace and scope of innovation happening as fast as it is today. In that environment, having a regulator that sits in the middle and acts like a referee, not only for the very new and novel, but for the mundane, making sure the clearinghouse is taken care of. And if you look at the trade routes, the way that, even the traditional commodities are moving, who's the new producer in the world, and who has new surpluses, it is most critical at this point that I think that the CFTC sets in the middle of that and makes sure these markets continue to be transparent, open, and act as functional as they have.
Speaker 1
Well, thank you both, Miss Stump and Mister Schwartz, this is also a time of transformation at the commission. With new leadership and potentially new jurisdiction, how can the commission meet the moment and tackle the issues that Miss Crichton and Mister Processor have raised? And what does the commission need to continue to be a premier financial regulator, even as the markets continue to grow and change?
Speaker 3
As you've rightfully pointed out, there is a lot to do, and there needs, in my opinion, to be the agency devoting time and attention to these matters. But during a period of transition, it is more challenged. So I do look forward to a Senate-confirmed chairman, and I look forward to the agency being able to get back to regular order. And by that I mean having open meetings with public input, issuing rules that enable the public to have a say in what is occurring in the marketplace. Specific to some of the things that were raised, margin adequacy.
I'll start with margin adequacy and clearing. There is a real issue with clearing capacity. It was well established when I was at the agency that as we brought in more products to the clearing environment under Dodd Frank, which was a very good response to ensuring that counterparty credit risk was addressed. We also, at the very same time, saw the banking regulators putting restrictions, proposing restrictions on the ability of those who acted as intermediaries to take on more clearing. And there seems to always be a little bit of a misaligned mission with the market regulators and the banking regulators. The banking regulators are most concerned with sustaining the banks, where the market regulators are concerned with functional markets.
So we had an ongoing dialogue with the banking regulators when I was there to try and mitigate some of that, and I think that should certainly continue. I hope that it does continue, and I hope that with more commissioners, a Senate-confirmed chairman, that there will be a greater coordination with the banking regulators and the CFTC as a market regulator. With regard to some of the market structure changes that Mister Prosser mentioned in his testimony, there have been an enormous call. Of recent days, there has been a number of calls for input from the public on a variety of new market structure changes. I do think that as those are digested by the new chairman, we will see responses in the form of rulemakings, where the public can engage.
Speaker 1
Well, thank you very much. My time has expired, but hopefully, we'll get a chance to circle back. Curious to hear your insight on that, mister Schwartz. I'll recognize the general lady from Minnesota, the ranking member, for five minutes.
Speaker 2
Thank you, Mr. Chairman. This is to Mr. Prosser. I greatly appreciate your testimony and specific recommendations for congressional action in reauthorizing the CFTC, particularly your call for funding and staff at the agency to allow it to keep pace with market growth, technological complexity, and of course, global competitiveness. I also noted you're urging the committee to ensure that regulatory standards prioritize the needs of commercial end users and consumers, not just the financial intermediaries. New market entrance or speculative interests.
How does the committee do that? Are there specific changes in the Commodity Exchange Act that we need to think through in order to achieve that?
Speaker 4
I'm not qualified to recommend specific changes to the Commodity Exchange Act. But I would say that as we go forward with the new challenges, with new entrants in the marketplace, the traditional have worked pretty well. The regulatory environment that we've dealt with in the traditional markets, and you think about the Ukraine war and Chernobyl all the way back, and the weather events. And we have navigated those relatively well. The markets have bent when we needed to, and we changed regulation as we came out of 2008.
So I would suggest that they have done pretty well in our traditional markets. We're very interested in what the innovations are gonna bring, and we're gonna ask that the separation of those regulatory regimes between the traditional markets and some of the new. What might be good for the new side might not be good for the traditional markets. We simply don't wanna squash innovation because I don't want these markets moving overseas. I don't want the price of soybeans to be discovered in Mato Grosso instead of on the Mississippi and Illinois Rivers. And part of that is making sure that we do continue to innovate, but we need to do that with an eye towards making sure that the stuff that's working now continues to work.
Speaker 2
Well, speaking as somebody who borders the Mississippi River, thank you for that. This is really to the whole panel. The Republicans on the House Appropriations Committee defied the administration's budget request to increase the agency's funding for full year 26 and instead propose cutting the agency's funding from full year fiscal year 25 levels by 8%. Talk to me a little bit about, obviously, you know, we've got new innovations coming with really additional responsibilities coming to CFTC. So, do any of you think that the cut is appropriate, necessary, and particularly considering the new responsibilities that Congress may give them?
And we'll start, I guess, from my right to my left. Mister Schiffrin.
Speaker 7
Thank you for the question. As I said in my opening statement, I think now is the time to be increasing funding for the CFDC and not decreasing it, especially if the CFDC is going to be asked to now oversee things like crypto in the prediction markets. It seems impossible for it to fulfill those new responsibilities and also the essential functions that it already has, without additional funding and additional staffing.
Speaker 6
Thank you. You can tell from Mister Prosser's testimony that, you know, the private sector does not want a hobbled CFTC. It's important. They depend on it. And, there has generally been bipartisan support for making sure the agency is adequately funded, and it's underfunded now, let alone can we predict how difficult it would be, in the future as its responsibilities appear very likely to increase.
Speaker 5
Thank you. FIA supports an adequately staffed and resourced CFTC, and we'll defer to Congress on what that means.
Speaker 3
Thank you. Yes. I do believe that the agency could certainly do well with more resources. Given budget situations, I know all agencies are being asked to do more with less, and the CFTC is no different.
Speaker 2
Thank you. And in my thirty seconds, Mister Shifrin, let's talk just a minute about enforcement at the CFTC. Give me your thoughts on what needs to happen. It's been pretty lackadaisical.
Speaker 7
You for the question. Exactly. I think we've seen CFTC enforcement ground to a halt, and I think that's problematic. If you don't have the cop on the beat acting like a cop on the beat, you're not going to have the protections that are there to prevent fraud and manipulation do what they're supposed to do.
Speaker 2
Thank you all so much. And with that, mister chairman, my time has expired, and I yield.
Speaker 1
Thank you, General Lady. Now recognize the gentleman from Oklahoma, former chairman of this committee, Mr. Lucas, for five minutes.
Speaker 8
There's nothing like being a recovering chairman, Mr. Chairman. Thank you, and thank you to our witnesses for being here today. The subject of today's hearing is, of course, the reauthorization of the Commodity Futures Trading Commission, a commission that served our ag and energy markets for over 50 years. The authorization for the CFTC expired over a decade ago, as we've discussed. Reexamining the commission, its functions and its authorities is a worthy goal in light of the change the world has gone through since the commission's expiration. Farmers and ranchers use tools like the derivatives that CFTC regulates to manage price volatility, mitigate risk.
And that's why it is a particularly relevant time to examine the commission, as uncertainty in the farm economy is elevated. Keeping derivatives markets affordable and accessible is essential for our producers to supply the food, fiber, and energy our world needs. Ms. Stump, the CFTC coordinates with the Securities and Exchange Commission as the products and firms they regulate often interact. Take us back up to the 40,000-foot level for just a moment, and explain why two separate and distinct regulators for commodities and securities is valuable to consumers.
Speaker 3
I think often it's misunderstood. First of all, thank you for the question. It's very relevant. I think oftentimes it's misunderstood, even sometimes by the marketplace, the distinction between the CFTC and the SEC. Certainly, they both regulate some of the same entities.
There have been suggestions that the two should be merged. I've often scratched my head by this proposition given that congress has given each agency a very distinct how-to in the way they carry out their missions. The CFTC has embedded in its purpose to promote innovation. That is not in the SEC's mandate. They both are responsible for protecting customers in the case of the CFTC, and protecting investors in the case of the SEC.
But this innovation is very distinct in the purpose of the CFTC. And I think Congress has done a remarkable job of explaining to the CFTC how they want them to go about being a regulator that embraces innovation. The SEC does not have that mandate.
Speaker 8
You're exactly right. CFTC is proactive. SEC is reactive. Beginning with Miss Crichton, and I want Mister Proser's thoughts on this as well. Last week, I met with Vice Chairman Michelle Bowman at the Federal Reserve's Board of Governors, who is finalizing a new capital framework proposal.
I was disappointed to see that in the original Boswell endgame proposal, significant capital penalties on clearing derivatives for end users reduced the availability of these required services. Can you speak to the importance of cross-agency collaboration between CFTC and the banking regulators?
Speaker 5
Thank you, and happy to do that. As we think about two of the most significant impacts that have reduced the amount of clearing capacity available, in particular to commodities end users, one has been the lack of margin adequacy, and the other has been the punitive nature of bank capital. And so we too were quite disappointed to see the changes that were proposed previously. And I think part of, back to Ms. Stump's comments, part of the benefit of interacting with the CFTC is as deep derivatives markets experts, we were able to articulate the impact of what that proposed regulation would mean, in particular, on the amount of clearing capacity we'd be able to provide.
And so in their partnership, we were able to work hand in hand with the banking regulators to articulate what would happen. Clearing businesses over the course of the last five years have seen capital between 2020 and 2022 double. And then what was proposed, two years ago with the Basel III endgame reproposal, that capital would have been increased by another 80%, which would have further served to decrease the amount of capacity we provide.
Speaker 4
These markets need capacity, not just for a normal Thursday morning, but for when geopolitical events happen, for when the weather happens. This FCM capacity issue is real, and it's real in the country. We need regulators to work together to make sure that we have adequate protections from the FCM through bankruptcy and all of the things that works on. But we need to make sure that we don't put burdens or barriers to those who wanna participate in those markets. And I think that Basel III was one of those, the idea that the capital requirements for those would have been so high that it seemed impossible to me.
So we need agencies to work together to make sure that we have as much capacity for SEMs to clear these derivative products, because that matters to those end users in the country, particularly the small end users in the country that don't have the market power to find other FCMs.
Speaker 8
Thank you. Mister chairman, my time's expired. I'll submit a couple of questions in writing to the witnesses.
Speaker 1
Very good. Thank the gentleman. And I'll recognize the gentleman from California, Mr. Costa, for five minutes.
Speaker 10
Thank you very much. Mister chairman, I obviously concur that we need to deal with the reauthorization, congress needs to do its job. But when we talk about the Commodities Future Trading Commission, and the traditional areas in which you provide oversight with regards to derivatives and others, there's an area that hasn't really been brought up to the degree that I'm concerned about, and that is the red flags on so-called event contracts. And, also, in California where I from, and a lot of Indian, gaming, authority. These look a lot less to me like risk management tools that Congress ever intended the commission to deal with.
And now you're engaged in unauthorized online gambling for everything from sports events to even war. And I don't think that was intended. Mister Schwartz, are you familiar with the five categories that are prohibited under the commodity exchange? I assume all of you are.
Speaker 6
I'm familiar with the 5 categories. It's, rather than a flat prohibition, it is.
Speaker 10
Terrorism, assassinations, gaming, or any activity otherwise prohibited under federal law. Right?
Speaker 10
Okay. Given that framework, why do we allow then folks to go ahead and bet on things like sporting events or wars?
Speaker 6
That's because the statute gives the CFTC discretion. It says it may make a determination that a given contract is contrary to the public interest. The CFTC hasn't done that, and so.
Speaker 10
That's the statute expressly prohibits event contracts based upon war, terrorism, assassination, gaming, or activities that are otherwise illegal under federal law?
Speaker 6
No. It's a yellow light rather than a red light, and delegates to the CFTC to deal with individual.
Speaker 6
Well, the CFTC has the authority to take a look and see if it's contrary to the public interest, to have that trading on an exchange.
Speaker 10
In that light, do you think Congress did not intend to allow companies to offer products that led individuals to bet on sporting events?
Speaker 10
It's a concern, but what are we doing about it? I mean, they you know, I mean, let me give you some examples, and I'd ask others to participate in this if you care to. $614,000,000 has been bet on who will win the Super Bowl. You know, I like football, but, I don't think that, that's the business that the commission ought be engaged in. 13,000,000 on how many tweets Elon Musk will make in the month of December.
I don't give a damn, frankly, but I don't think it's a part of your jurisdiction. Or 34,000,000 on whether the United States will attack or bomb Venezuela. My gosh. I mean, what is this about? 3,000,000 on whether Russia will conquer Ukraine or a city in Ukraine?
I mean, news often makes this sound like, you know, what's happening in that part of the world with regard to the war. Gambling on life and death on the Ukrainian or on the battlefield is ripe with conflicts of interest. I where in the hell are we going with this?
Speaker 6
Well, I'll leave the policy questions to policymakers. I think I won't quibble with anything that you
Speaker 10
The industry's gone more than $2,000,000,000. I find this exasperating every single month, and there's no oversight.
Speaker 6
That's an important, separate issue. I think, to my mind, I don't have any doubt that these products meet the definition of swap and are within the CFTC's exclusive federal jurisdiction. I don't think congress intended state gambling regulators to have a say on what is allowed to trade on a designated contract market. That's separate from the policy question?
Speaker 10
By expressly refusing to bless contracts that effectively let people bet on sports or other jurisdictions, you're either blessing or not those who want to ban sports betting.
Speaker 10
Well, it just seems to me that we're not doing our job. My time's expired, mister chairman, and I'd like to get, obviously, other members of the panel to comment on this. But I think this is a serious issue that we're overlooking at this point in time. And I'd like to be able to submit other questions in the future. But I think this is something that we need to drill down on.
Thank you very much for the time.
Speaker 1
My name is expired. Thank you, gentlemen. Now recognize the gentleman from California, Mister Lamaofa, for five minutes.
Speaker 9
Thank you, Mr. Chairman. Appreciate it. Thank you, Mr. Scott. I just wanted to pick up on that topic with how is it in the bailiwick of CFTC that we would know, because, you know, farmers obviously rely on the futures markets for in many, many aspects. So sports betting is somehow being defined as being in the bailiwick of CFTC.
We're talking about, you know, they're being called trades when we're when it's just flat out gambling in this gray market area. So how is it that, with farmers needing this help, needing this ability to have trades and have CFT's attention on that, with and more time being devoted towards basically being a federal gambling regulator. And anybody on the panel must weigh in this, maybe especially mister Schwartz, but or miss Stomp. Does CFTC have the capacity under its current budget, staffing, and regulatory authority to be overseeing so-called markets offering betting on these sports events and other casino-style games?
Speaker 6
Well, as I've said, I don't think the CFTC has adequate resources now. So right. Expanding its remit without expanding its capacity is not helpful.
Speaker 3
So, this provision was included in the Dodd-Frank Act. At that time, there was very little interest in these sorts of event prediction market contracts.
Speaker 3
These markets have developed since then. But, nonetheless, the CFTC is tasked to oversee these types of prediction markets to the extent that they are put on a CFTC-regulated exchange. The CFTC wears so many different hats. And to Mr. Schwartz.
Speaker 3
Point, they often find themselves switching gears on a fairly frequent basis, whether it's dealing with position limits in the ag markets or wagering, if you will, or on an event contract market. Energy disruptions, there's no way for the CFTC to know when they get to work on any given day what they are going to deal with.
Speaker 9
It's fair to think of energy and, of course, agriculture as commodities and a market for it. But basically, gaming, gambling within that purview just seems kind of absurd to me. We have other entities that should be really having the responsibility, whether it's state-level gambling commissions or the Indian gaming regulatory. Some anywhere else seems like, especially with the workload you'd have and me being from agriculture and this being the ag committee, as important as it is for stability in agriculture and those options, what shouldn't this responsibility be shifted elsewhere where it be more appropriate?
Speaker 3
I can only speak to, I'll leave the authorities and their allocation to Congress. I can only speak to the fact that the statute currently provides the CFTC with a.
Speaker 9
Would your workload be easier if it didn't have this portion? Would CFTC's workload be easier and more focused if it didn't have this area to oversee, especially not in 2010, but in 2025?
Speaker 3
Well, the workload would certainly be less. That said, I actually think the culprit here is the fact that when the CFTC wrote this rule in 2011 that it didn't sufficiently take into account the public interest determination that is required by the statute.
Speaker 3
Sure. The way the statute's written, in my opinion, is that the agency is tasked to make two determinations. One's a threshold question. Are any of these contracts one of those five enumerated things, including gaming? And then, subsequent to that, they may make a determination that the contract is not within the public interest.
When the agency wrote the rules.
Speaker 9
Well, I think that's a key point. The public interest. What is the public interest?
Speaker 9
with you. In this portion. So and would it be better off in a completely different entity that is much more specialized or, you know, experienced in, basically online gambling. So, with that, I appreciate it. Mister chairman, thank you for the opportunity, and I'll be back.
Speaker 13
Well, thank you, Mr. Chair, and thank you to our ranking member, and thank you to our panelists for being here today. The Trump administration has nominated a chair for the CFTC but has not moved to fill the remaining seats. Even as industry and consumer advocates warn about emerging risks in some of these emerging markets, crypto, the growth of prediction markets, and rapid technological advancements, given the president's lack of urgency in filling these remaining seats, his own personal financial interest related to cryptocurrency, and the increasing complexity of the CFTC's regulatory responsibilities, I have serious concerns that the Trump administration is purposefully handicapping CFTC's capacity. For the whole panel, how does leaving the CFTC without a full board, in combination with the mass firings the administration has undertaken, weaken enforcement, and does it create opportunities for bad actors to slip through the cracks?
Speaker 7
I think absolutely. As I said in response to ranking member Craig's question, I think if you don't have a CFTC that not only has the resources that it needs, but that has a full complement of commissioners, it's not gonna be able to do its job. It's not gonna be able to do the job that it's traditionally been asked to do, it's not gonna be able to do the job that it's increasingly asked to do in new and evolving areas. And so, you need the CFTC not just to have, as I talked about before, a fully funded agency, but you have to have a full complement of commissioners.
Speaker 6
I will answer by saying that in my experience at the CFTC, when the commission was at full capacity, when it had commissioners with different expertise, balanced expertise like the statute requires, opposing views, it was a strength for the commission to be able to deliberate with perspectives that come from those places.
Speaker 5
FIA believes a full commission is important, and it's good for market safety and soundness.
Speaker 4
One of the benefits of having a full commission is the diversity of viewpoints that all the commissioners bring. And, obviously, I'm a little selfish on this side, but, you know, as we bring on a full commission, we would certainly hope that one of them would be deeply involved in agriculture and agriculture's issues and be able to stand out and support us in those. So we continue to say that we want a fully funded, fully staffed CFTC, and that's certainly one of the reasons why.
Speaker 3
I agree with everything that's been said. I was very fortunate when I was a commissioner to serve with four other individuals that were willing to come to the table and not only negotiate, but listen. And that's the important point. Many different viewpoints, many different backgrounds are critical, but also a willingness to work together and deal with very challenging issues.
Speaker 13
Thank you. As we, as you know, members of Congress consider reauthorizing, remember that the commission is the only federal financial regulator funded solely, as you mentioned, Miss Stump, through the appropriations, through annual appropriations. Because it has not been reauthorized since 2008, this is the case despite massive market growth in swaps, crypto. We've been talking about this all morning: prediction markets, as well as emerging technological risks. Markets are getting more volatile.
Financial fraud is getting more sophisticated, and yet the Trump administration is pushing a deregulatory agenda, while Congress allows the CFTC to operate without a modern reauthorization. So for the whole panel, can you speak to the risk that's posed by the CFTC continuing to operate in a rapidly changing financial landscape without a reauthorization? And how are our growers being affected by this?
Speaker 3
I'll just briefly say that I think it is necessary to reauthorize the agency for the very reasons you outlined. There is a tremendous amount of market evolution that has occurred since 2008. And just for frame of reference, I worked on that bill, and I had a child who was 2. He's now in college. So I would just say that I do think it is a worthwhile endeavor for the committee and congress to consider reauthorizing the agency with updated current parameters.
Speaker 4
I think from the end user community, the idea, and Dawn said this in her remarks, the certainty that reauthorization brings matters. And that's really from our perspective, knowing that they're gonna be there, knowing that they're gonna be the referee matters to the end user community.
Speaker 14
Thank you, Mr. Chairman. Ms. Stuff, you've already talked about how important it is for the commission to engage in research activities. We've had some discussion about technology and how fast those advancements are moving.
What.
Speaker 14
The challenges or impediments to the commission best fulfilling the mandate that they have to promote responsible innovation?
Speaker 3
Thank you for the question. Yes. I think Congress had the foresight in 1974 when the agency was created to include in the statute a research and information program. I would say that language is slightly outdated now and could benefit from an update. I mean, technology was very different in 1974, and the task was very different in 1974.
So to the extent that the committee would seek to update that, I think that's worthwhile. As to impediments, there have been occasions when the agency would have benefited from obtaining information from the private sector. Because when we talk about technology, the private sector is where the most beneficial information would be for the CFTC to conduct the research. And there are occasions when federal procurement laws have prevented them from doing so.
Speaker 14
Part it gets to the definition of a gift. We most oftentimes think of a gift as something of a monetary value or a physical item when technology the definition there. And so I wanna move to you, mister Schwartz. My colleague, Congresswoman Chris McDonald, Revit, and I introduced the CFTC Research and Development Modernization Act to rewrite the CFTC's mandate for research and development activities. Specifically, it modernizes and hopefully will future proof the commission's research and development mandate, provide an opportunity for the commission to create a new research and development plan.
How might clearer requirements, definitions, and authorities around this mandate improve the operations of the commission?
Speaker 6
Well, to pick up on something that commissioner Stump said, the language is fifty years old now, and it authorizes or directs the commission to have a research and information program about things like determining the feasibility of using computers for trading. Now I think we're all satisfied that it is feasible. The commission has moved on. But it would be helpful to have a clear mandate to tell the look. The commission would always rather have clear direction from Congress to execute rather than, you know, set the mission for itself and make sure that it doesn't cross any lines.
The appropriations issue is very important. So I think all involved would appreciate that kind of legislation.
Speaker 14
So I'll stay with you, mister Schwartz. No other regular regulator currently exercises authority over entities registered with the commission, such as futures exchanges, clearinghouses, or FCMs, for activities subject to the Commodity Exchange Act. If a state regulator were able to unilaterally determine that a transaction was subject to state law, what would be the consequences of state regulators also exercising concurrent jurisdiction over an exchange, a clearinghouse, or an FCM for that transaction?
Speaker 6
That is a question that was asked back in 1974, and Congress answered it with exclusive jurisdiction for the CFTC. You would have a patchwork, and that's probably too generous, of 50 states and the District of Columbia, regulating activities that occurred on, for example, a designated contract market. I don't think it's workable.
Speaker 14
Alright. Those are my questions. Chairman, I will yield the one minute and five seconds back. Thank you.
Speaker 12
Very good. Mister Scott Banks, the one minute for future use, and some of future hearing. And with that, the good gentleman from Illinois, mister Jackson, you are recognized.
Speaker 15
Thank you, chairman. Thank you, ranking member. Once again, I'd like to follow up on the earlier discussed question on the unique features of the agency being the only US financial regulator that is not funded directly by the industry that it oversees. And there's this explosion now going on in sports betting. I'm very much concerned about the susceptibility of young people to these market conditions.
So over the last decade, we have witnessed the explosion in legalized sports wagering, an industry that has grown faster than many of our traditional financial markets. And we know whenever capital, technology, and human behavior converge at this speed, history teaches us that risk also accelerates. In finance, we would call this a systemic creep. This isn't where we wanna go, but this is where we can unintentionally end up. The danger that small, unregulated activities aggregate into a structure capable of inflicting broad harm.
We call these young persons students and athletes, but after the gamblers and other people surround them and prey upon them, then they're cast aside as adults, and have to fend for themselves. And considering that the sport is gaining money, and at the same time, the president is reducing the oversight when there's more profitability, this is an open question probably starting with you, mister Schwartz. Do you think the administration is going in the right direction, having a reduction in enforcement of 20%, for oversight at the same time? There's more money, more profitability available. Will this create more harm for students or more safety?
Speaker 6
Well, I certainly share your concern about young people. I have my 15-year-old behind me here in the audience today. And if I find out that he's been betting on sports or taking positions on a futures exchange, I'm gonna take away his phone. Okay? So I think it benefits everybody to have a strong enforcement program, not to turn against my son, but against the actual wrongdoers.
And I don't think that the I think most parts of the private sector would agree. Depends on who the enforcement program is looking at, but that's a very important aspect of what the CFTC does.
Speaker 15
Mister Schiff, and I would ask that of you. Is administration going in the right direction and asking for reduction, and the agency has no means by which to generate funds to safeguard the protection of students?
Speaker 7
Thank you for the question. As I said earlier, no. I think it's the wrong direction. I think the funding for the CFTC needs to be increased, not decreased. I also think that it needs to be increased, so the CFTC can focus on its core mission.
I'm not sure that the Commodity Futures Trading Commission is the right regulator to regulate what is essentially sports gambling. And so we want the CF, but if it's going to be forced to do that, it needs to have way more funds than it has currently.
Speaker 15
Okay. And today, as we look, the danger is not theoretical. The decisions that this body will make will have long-lasting impact. It's already pressing against the lives of young people. Many of these NCAA students, students that are able to make more money than professors, students that are the ones that went to college, are being preyed upon.
I would ask that of you, mister Prosser. What should the agency ask for funding, if you have an opinion on that, sir?
Speaker 4
I don't have an opinion on funding. I and I can say that from our side, as we look at all the new innovations that are happening, it's not really our place to say whether it's good or bad. But I think that it's better to have that debate with a fully funded, fully staffed commission in place to make sure that all of the participants get to have input, and then to have a decision rather than to do it in a vacuum.
Speaker 5
Thank you. I'll echo Mr. Prosser's comments. I think I'm not a lawyer, but I am a risk manager. So two places that I would encourage not only Congress, but the CFTC to focus on is the risk management framework that will ultimately potentially apply to these contracts. And one is thinking about segregation of default funds.
So where there's an intersection of these new products with more traditional products and end users, we have to think about the segregation of default funds to protect those communities from one another and insulate them from each other. And I'd also encourage everyone to think about the impact of direct clearing by removing intermediaries, by removing, in particular, the asset segregation and customer protections that we provide. And when they go directly to the clearinghouse, many of those protections go away. So there's kind of two very practical considerations that should be part of this as well.
Speaker 15
Well, I've exceeded my time, Miss Stump. I wish I could have gotten to you as well, maybe next time. Chairman, ranking member, I yield back. But there's a fine line between the fandom, the speculation, and the couriers, you know, now blurred and accelerating in speed. I hope that we fully fund this, and I strongly disagree with the administration in cutting back funding for oversight.
Mister Jackson yields back. Thank you, sir. The chair's recognized for five minutes. I have been heartened by how many of my colleagues on both sides of.
Speaker 12
The aisle have emphasized the need to reauthorize the CFTC. And, of course, thanks to all of our witnesses for so eloquently explaining why that matters. Of course, it's not just people in this room who agree. In fact, National Grain and Feed has asked me to submit for the record a letter asking us to reauthorize, and unless there's objection, that will be submitted. Alright.
Miss Crichton, perhaps a year ago, I submitted a letter to then CFTC chairman Russ Benham asking for them to revisit, strengthen the clearinghouse margin methodology to better support end users as they do risk management and liquidity planning. Give us an update. Where are we at with that?
Speaker 5
Thank you for your work on that letter. We greatly appreciate it, and we felt like it sent a strong statement to the commission to prioritize their focus on margin adequacy. I think as we look to where we are now, unfortunately, we haven't seen as much progress as we'd like on behalf of the clearinghouses, in terms of thinking about what is an appropriately calibrated risk margin regime. And so we do think that should be a priority for the incoming chair to focus on the safety and soundness of the clearinghouses, and think about kind of making some revisions to what the margin framework is.
Speaker 12
So you say we haven't made enough progress. Has substantial progress been made at all?
Speaker 5
In short, no. And I think as we continue to live through various events that have created market volatility, we see what the impact of that is. And so, in many perspectives, you would say, you know, we withstood recent volatility quite well. We're not aware of any defaults as part of the ecosystem. But what ultimately happens when we see margins go too low in times of low volatility, and we enter into a period of intense volatility, not only do we create a scenario where we have large increases in initial margin that's required, we have a requirement for a significant amount of variation margin or mark to market that's required on behalf of the community to post.
And so what that means is it actually undermines the credibility and, ultimately, the capacity that we're all willing to stand in for and provide. And so that becomes an important topic. It kind of ultimately feeds into the conversation that we've been having with the end user community. So, not enough progress.
Speaker 12
Yes. Thanks very much. Mr. Schwartz, I thought your testimony was excellent in at least a couple of different ways. I think you did a good job reminding all of us that despite these many market shocks in the last years, the stuff that the CFTC has within their jurisdiction held up pretty gosh-darn well.
I also liked how you talked about the expertise, the diverse expertise that exists within the commission. You also mentioned, at least in your oral testimony, that they're concerned they don't have enough resources. So talk to us a little bit about the expertise within the agency. Are there particular areas where you think there is a deficiency? And do you get the sense that the commission has a plan to address that?
Speaker 6
I will just say that, when there is one, it is impossible for any one commissioner or chair to have a balanced expertise in all of the areas that I listed. So, you know, I'm not going to pick apart the knowledge and, of any one individual, but it needs to be broader because the markets are extremely broad. It touches, again, as I said, many, many areas of our economy, probably more than any other regulator. So you have to make sure that the commission has the expertise the statute requires, and you ought to make sure that it's adequately staffed because the shedding of staff has not just been numbers. It's been some of the most experienced and knowledgeable people at the agency.
And I don't know how you address that, but it's gonna be important to get people of talent and education and experience into those positions, certainly before crypto legislation comes out. And while these products are expanding, the markets are expanding in some of the.
Speaker 12
Things we've discussed. Commissioner, I've always understood the power of this self certification process, which I think helps to balance the outside expertise, the innovation you talked about, as well as leveraging the expertise inside the agency. Does that do we feel like that's holding up well here in the longer haul?
Speaker 3
Well, I'm a huge proponent of the self-certification process. I do know that, well, I'll start by saying that without the self-certification process, the task that Congress has given the agency to promote innovation might be hindered. The self certification process permits a more expedited process for various new products to come to market. But I would also like to take the opportunity to dismiss the fallacy that this sort of process is without any oversight. Certainly, with the vast number of new products that are coming to market currently, there is a lot of work for the agency to do.
But they have to do this through examinations. They have to do rule enforcement reviews of any of the entities that are.
Speaker 12
Sorry. I need to give myself the hook, commissioner. It's okay. If you would be willing to submit any other comments to the record, that'd be wonderful. Thank you.
Speaker 1
Alright. Now please recognize the gentlelady from Ohio, Miss Brown, for five minutes.
Speaker 17
Thank you, Mr. Chairman. The commodities futures trading commission was created fifty years ago to ensure that farmers, ranchers, and energy producers and manufacturers could rely on fair, transparent markets to manage risk. For decades, that meant corn, soybeans, cattle, oil, and electricity. Markets that affect the price of food on our kitchen tables and gas in our cars. But today, the CFTC is being asked to do far more.
In addition to its traditional responsibilities, it is now on the front lines of regulating crypto derivatives, digital commodities, algorithmic trading, and new prediction-style contracts that blur the line between finance and gambling. These markets operate 24 seven across borders and at incredible speed. That means the job of protecting market integrity, preventing manipulation, and safeguarding customers has become more complex and more demanding than ever before. At the same time, the agency is expected to oversee hundreds of trillions of dollars in futures and swaps markets, while operating with a commission that has been reduced to a single sitting member and a budget that is a fraction of the size needed to keep up with the market policies. That imbalance should concern all of us because when markets move faster than the regulators, everyday people are often left to pay the price.
We have seen what happens when financial innovation outpaces oversight, or when Congress leaves regulatory gaps: a global financial crisis. We cannot afford to repeat those mistakes in crypto or prediction markets. So, mister Sheffrin, the CFTC regulates traditional agriculture, energy markets, and emerging areas like crypto and prediction-style contracts. It is operating with just one commissioner and a relatively flat budget. What specific new resources, staffing, technology, funding, or enforcement authority must Congress authorize in order to prevent the agency from putting consumers and producers at risk?
Speaker 7
Thank you for the question. Congress simply needs to ensure that if the CFTC is going to be tasked with not just fulfilling its traditional responsibilities that you mentioned, ensuring that the prices of commodities are fair and are set by supply and demand, but also take on the responsibilities for things like crypto and prediction markets. It has the resources it needs to properly oversee those markets, and that would require tremendous new sources of funding and staffing. And one of the reasons for that is because, as you kind of alluded to, traditionally, the CFDC has been focused on markets that have sophisticated institutional players. But the products, the new products that you're talking about, are really geared towards retail investors.
And the CFTC has not traditionally had a focus on protecting retail investors. And so if that's going to now be its focus, it needs to kind of have the resource and staffing to shift its focus.
Speaker 17
Thank you. And, Ms. Crichton, what are the risks to clearinghouse stability today if the agency staffing and resources do not grow alongside its mission?
Speaker 5
I think, thank you. From a risk management perspective, you know, we're incredibly focused on what is the framework that these contracts may be margined under and how are all of the financial resources that are at the clearinghouse, how are they brought to bear in the event of a default or an extreme stress situation. So one of the things that we wanna make sure is that we're thinking about, particularly on clearinghouses where there's an intersection of end users as well as retail investors in these event-type contracts, that we're thinking about segregating the default fund and segregating the resources that backstop those contracts. And we think insulating those two very distinct pools of risk is an incredibly important step.
Speaker 17
Thank you. And back to you, mister Sherfram. What are the risks to market stability, rulemaking legitimacy, and enforcement credibility when an agency overseeing hundreds of trillions of dollars is operating with only one sitting commissioner?
Speaker 7
Well, as was referred to earlier, right, if the CFTC can't act through regular order, it's gonna be harder for it to fill its role of essentially being the cop on the beat. Right? That's what we're talking about. We're talking about the CFTC policing the derivatives markets. And if there's just one commissioner and not a full complement of commissioners, and there's no bipartisan discussion, and the CFTC doesn't have the resources that it needs.
It's not gonna be able to fill its cop-on-the-beat function.
Speaker 17
Thank you so much. Reauthorization is not just about keeping the lights on. It is about making sure the CFTC actually has the tools, the staffing, the leadership, and the funding to do the job Congress expects of it. If we expand the CFTC's mission without expanding its capacity, we aren't strengthening oversight. We are weakening it in ways that will be felt by farmers, consumers, and everyday families.
And with that, Mr. Chairman, I yield back.
Speaker 1
Thank you, gentlelady. Now recognize the gentleman from Indiana, Doctor Baird, for five minutes.
Speaker 18
Thank you, mister chairman, and thank you, committee members and witnesses, for being here. You know, it's really helpful to have the expertise that you possess to share with us so that we can make better decisions about whatever it is we're talking about, in this case, the CFTC reauthorization. So I'm gonna start off, Mister Prosser, with the idea that you mentioned real-world uncertainty in the soybean oil market due to the delayed federal guidance on the biofuels policy. So how does regulatory uncertainty, whether it's the EPA, the Treasury, the lack of CFDCA reauthorization, how does that translate into volatility and increased risk for farmers and other commercial end users?
Speaker 4
Markets are pretty good at pricing risk, and uncertainty increases risk, and that price flows through to either the consumer or the producer. If you take the biofuels policy and the different contortions that we have had trying to get it started and unstarted and reauthorized, and we're going through a process now, at the EPA to try to finalize it. All of those as we try to determine the possibility of it happening or not happening needs to get priced in these markets. And I think that's been a really interesting experiment in how these markets work. As we get more certain, we throw those prices that we can actually pay more to the farmer and sell products cheaper than when we can't, when the process is more uncertain.
And, certainly, the political process we've gone through around renewables has created uncertainties that have thrown, soybean oil markets, soybean meal markets, and to some extent, soybeans kinda in that arena where uncertainty was priced in a negative way.
Speaker 18
Thank you. Anyone else have a comment in that regard about the soybean oil? If not, my next question goes to Ms. Stump. Drawing on, you know, you've got a lot of experience both in and out of commodity futures trading.
And so drawing on your work during the financial crisis and the implementation of Dodd Frank, what lessons should Congress keep in mind as it approaches this next reauthorization?
Speaker 3
Having worked on the legislative side during a crisis, and during a time when we didn't have a crisis. I think the policy outcomes are much better when you adjust the Commodity Exchange Act outside a crisis environment. Oftentimes during the development of Dodd Frank, and I'm not suggesting that there weren't great changes made in the financial crisis in response to what was going on, but it is very challenging to legislate in the midst of a crisis. We'd be far better served to address changes to the Commodity Exchange Act before the event of a crisis.
Speaker 6
I think the self regulatory model that the Commodity Exchange Act establishes is very helpful in this regard because as new challenges come over the horizon, the commission has the ability to deal with them, quickly and flexibly. And, it's not constrained by the same kinds of rigid rules that other regulators might be. And so it doesn't have to rigid rules, can lead to loophole-seeking behavior and just kinda hinder the agency from reacting quickly. So I would just urge congress to consider the importance of the principles-based regulations, self-regulatory model that the commission has, and allow the markets to develop in an innovative way, but also not handcuff the agency from addressing issues as they arise.
Speaker 18
So, thank you. And we've got about 25 seconds left. So the other two that I haven't got to, I'd like to have a chance to talk to you. But do you have any comments to add? You got about 16 seconds now.
Speaker 5
Maybe I'll just add. I agree. I think there are a significant number of merits to the self certification model. But I think given the number of new products that are coming to the market, it is worth taking a closer look at that.
Speaker 1
I thank the gentleman. Now please recognize the gentleman from Alabama, Mister Figures, for five minutes.
Speaker 19
Thank you, Mr. Chairman and ranking member. Thank you to all the witnesses for sitting through this. Normally, when you see me, it means that you're very close to the end. But given the participation today, that may not be the case, as members come back and forth. So I apologize if I'm not near the end.
But, look, it's been hit on pretty regularly here today, and pretty consistently in terms of the staffing challenges, in terms of the overall commission, the current structure of the commission there being down to one commissioner. And I just wanna go down the line. And, you know, just in light of CFTC's expanded jurisdiction that we're considering here, expanded crypto market participation, do we think that given recent reductions in force that we've seen, given the overall staffing situation at the commission currently, do we think that the commission is best set up for success given the current status of staffing and the commission structure where we currently are? We can just go down the line, Miss Stump.
Speaker 3
Not familiar with the specifics of their staffing needs. I'll leave that to the current commission. But I will say the CFTC has always punched above its weight, and I'm certain that they will continue to do so.
Speaker 4
One commissioner is not enough. We need a full commission with all their various backgrounds and interests, and especially in these markets that continue to evolve and innovate. But we would continue to encourage, even though the political process goes through. However it needs to happen, we need to get the commission fully staffed. And, again, I would repeat the idea that we would like some of those to have an ag background.
Speaker 5
Thank you. Yeah. FIA supports a fully staffed and resourced commission. We think the diversity of expertise, the diversity of opinions, the durability of the policy that it will create, is incredibly important for safety and soundness.
Speaker 6
Yeah. I will add that a fully staffed commission is not important merely to restrain activity in the private sector. But I know that people in the private sector are concerned about things like getting new exchange applications approved and getting new clearing applications approved. And without the right staff, it's simply not gonna be doable in an orderly or timely fashion.
Speaker 7
It would be impossible for the CFTC to adequately regulate the crypto markets, the prediction markets, and the traditional derivatives markets with the funding and staffing it has now. And I also think not only is the full complement of commissioners important for bipartisanship, but it's important for the diversity of views, even if you're putting bipartisanship aside. Right? As was alluded to earlier, if you just have one person, that person can possibly have expertise in all the different areas that the CFTC has to oversee. So putting aside partisans, you need at least more than one commissioner to get all those views in the building.
Speaker 19
Yeah. And, mister Schirvin, how do are we in a ticking time bomb situation given the current staffing in your view? Or can things be sustained, we're gonna hit a cliff at some point?
Speaker 19
Thank you. Then also on the accessibility standpoint, and, I mean, accessibility through the lens of who can actually participate in and benefit from the markets that CFTC oversees. And for many rural farmers and small producers, including those in states like Alabama that I represent, Broadband limitations make it incredibly difficult, sometimes impossible to access pricing tools and education, risk management platforms, or even basic agency information. And these producers rely on future markets the most, yet they face some of the steepest barriers. Miss Crichton, with the current staffing, shrinking outreach capacity, technology deficits, does CFTC currently have the resources necessary to improve accessibility of those sort of educational materials, complaint systems, market information, for customers with limited broadband access?
Speaker 5
So I would say I have less of a view on that. But what I can offer in terms of follow-up from here is both resources from an FIA and a Goldman Sachs standpoint. Goldman Sachs has invested heavily in rural communities, and we'd love to follow up with you on that.
Speaker 1
Thanks, the gentleman. Now recognize the gentleman from Indiana, Mr. Messmer, for five minutes.
Speaker 20
Thank you, mister chairman, and thank you all for taking the time to highlight the importance of the CFTC this morning. Earlier this week, the president, alongside Secretary Rollins and Bassett, announced bridge payments to our farmers. While this assistance is what the producers of my district need to stay in business next year, they're the first to say they would never want to take these payments. American farmers would rather rely on healthy markets that honor their investment than have to accept federal ad hoc assistance. Mister Prosser, you shared the American derivatives markets are a vital tool for farmers in the risk management of their operations.
From your perspective, as a commercial end user, could you further explain the role of futures and option markets in helping agriculture producers plan and manage seasons of market volatility and shrinking margins?
Speaker 4
For the end users, the derivatives markets, again, are not an opportunity to speculate. We use them as risk-aversion tools. When a farmer asks us to buy his crop, we will offset that risk in a futures market, therefore stripping off what's a flat price risk and a basis risk or a freight differential to the delivery point. This allows us a lot more capacity because we're not taking the whole price risk. It allows us also to weather extreme price events, whether that be geopolitical or weather-related.
The idea of having a functional derivative market in those ag commodities allows the whole industry to price farther out, with more capacity to provide more price certainty, not just for farmers, but for consumers.
Speaker 20
K. Thank you. Certainly, it is important for farm operations, as for any other, certainty is important for farm operations as far as any other business. Earlier this year, the committee spent months working on the Clarity Act to provide regulatory certainty for innovators in the digital asset space. Mister Prosser, you highlight the importance of protecting the marketplace for our farmers while also incentivizing innovative technologies to establish roots in America.
Could you speak to the CFTC's unique role in ensuring that there's both fertile ground for new industries to innovate and stable footing for commercial hedgers?
Speaker 4
I think that we're most interested in the regulatory environment that we have for our traditional markets and protecting those to be open and transparent. There is going to be a debate about where this new innovation is going and how it's going to be regulated. And our initial interest is in making sure that those two Venn diagrams don't necessarily intersect or the direct or the amount that they intersect is limited to the part of the industries that work. Where am I trying to go? So the one I'm in the back of my mind is 24/7 trade.
Twenty-four seven trading might be absolutely adequate for some of the new innovations. We don't believe it works for our traditional markets. It's not again, derivative markets are derivative cash markets. Our cash markets don't trade like that. It creates wholesome liquidity.
So having a fully funded, fully staffed CFTC would allow us to come to our regulator, lay out the reasons why certain things that might work for crypto or events don't work for the traditional markets. And, hopefully, we keep the regulatory regime the same for the traditional markets we have today.
Speaker 20
Okay. Thank you. The CFTC's work provides a foundation for the entire fabric of the American industry. Unfortunately, the absence of the reauthorization package, some of the commission's regulations have grown stale. In fact, representative McLean Delane and I just introduced the CFTC charitable organization exemption app act to address regulatory issues at the CFTC that has unnecessarily plugged our churches for decades.
Although the fix has been approved by this committee three times and passed the house floor twice, failure to reauthorize the CFTC has kept the solution from being implemented to exempt our churches from regulation. Miss Stump and Miss Wartz, I know there are other similar issues impacting other industries that could be addressed through a simple reauthorization of the commission. How important is it that we reauthorize the CFTC, not just fund it, to bring substantive improvements to a variety of industries?
Speaker 3
I think it's very important. I think that there are a number of things since the last reauthorization that warrant improvement. Refinement is the word I would use, and this is the opportunity.
Speaker 6
So I would just add quickly that I don't think churches and universities need to be regulated as commodity pool operators. So I think we're in agreement on that.
Speaker 1
Thank you, gentlemen. Now recognize the gentleman from California, Mister Carberhaul, for five minutes.
Speaker 21
Thank you, Mr. Chairman and ranking member. Thank you to all the witnesses for taking the time to be with us today. Mister Schiffrin, my office has been hearing increased concerns surrounding online betting. Stakeholders have warned that this emerging unregulated gambling industry, also known as prediction markets, is abusing the CFTC's self certification process and that the commission has not taken sufficient action to stop illegal futures contracts. Right now, for example, individuals can put a bet on who will win the Super Bowl or whether Democrats or Republicans will take control of the House of Representatives next November, even though we know who that will be.
All these bets are being waged without proper oversight or safeguards in place. We have seen betting scandals in the NBA, MLB, and NCAA where bad actors were discovered as a result of information sharing, monitoring, and strict regulations at the state level. However, these same protections are not in place for prediction markets. Given this landscape, do you believe the CFTC has the expertise and experience to regulate what is effectively a multibillion-dollar gambling industry? And how would the CFTC address problem gambling, underage gambling, or cheating under this system?
Speaker 7
No. I don't think the CFTC has the authority or expertise to regulate sports gambling. It's the Commodity Futures Trading Commission. It's supposed to regulate the derivatives markets. And these event contracts, although they want to call them, you know, trading on derivatives, that's not what they are.
These are event contracts that essentially allow betting on sports. Take tonight's Thursday night football game. Right? You can go on sites like Calci and Polymarket and essentially put a bet on either of the teams. And if the team that you put a bet on wins, you get money.
That's gambling. That's sports betting. And the CFTC really has no expertise or authority in that area.
Speaker 21
Thank you. Mister Schwartz, you mentioned in your testimony that during your time at the CFTC, you witnessed what happened behind closed doors with commissioners while they deliberated important questions before the agency. You stated that Democrats and Republicans of good faith would debate, sharpen their own thinking, compromise, and sometimes even convince one another to change their minds. You also pointed out that partisanship should not, and typically does not, dictate how the CFTC executes its mission. With there being only one sitting commissioner currently on the CFTC, and a growing concern that it could stay that way, do you believe this is creating partisanship within the agency in how it executes its mission?
And do you have concerns if it remains with only one commissioner in charge?
Speaker 6
Well, it certainly diminishes eliminates the ability to meet and deliberate and sharpen thinking and to persuade one another. So I think it is just inherent in only having one commissioner. I'm not gonna comment on anybody's partisanship, but there is currently one individual who makes the decisions for the commission, and it's inevitably going to be that one person's decision who controls, partisan or otherwise. Thank you. Mister Prosser, as you likely know,
Speaker 21
The CFTC has seen a 20% reduction in staff. This reduction could impact the agency's ability to execute essential functions of protecting customers, consumers, preventing fraud, and encouraging market efficiency. In your testimony, you mentioned your support for full funding and staffing of the CFTC in order for it to keep up with the technological complexity, market growth, and global competitiveness. What current functions and processes at the CFTC are you concerned could be impacted by this reduction in staff?
Speaker 4
I don't have any specifics. The thing that concerns me is markets can be mundane for long periods of time and quickly change. And we don't get to understand when or the magnitude of those changes until it happens. And having a fully funded, fully staffed CFTC at the ready for the next inevitable market event is, we think, wise.
Speaker 1
Gentleman yields back. Now recognize the gentleman from Alabama, Mister Moore, for.
Speaker 22
Thank you, Mr. Chairman. I appreciate all the witnesses being here today, and I'm happy that the committee is holding a hearing on the CFTC's reauthorization. And, certainly, our desire is that we ensure that the CFTC can continue conducting oversight with stability. Miss Stomp, the CFTC is uniquely positioned to provide robust oversight, while also providing cryptocurrencies the ability to operate without over-regulation. How do you see the pending market structure legislation advancing the priority of both conducting the oversight and allowing the market to prosper with cryptocurrency?
Speaker 3
Well, when I started the agency, I repeatedly raised the alarm bells that I do not believe the agency has adequate authority, nor do I think any regulator has authority to regulate a component of the market, which is non-security spot. And this has become a point that has been raised repeatedly at the agency. The marketplace is desperate to have their product regulated, and so we should meet that with appropriate authority for the CFTC to regulate the spot market outside of the securities spot market. I would note that since that time, the agency and the marketplace have found a way to enter the CFTC space for retail commodities in the spot component. But I would also like to note that I don't think that's the cleanest approach, and I think the legislation advancing would be a cleaner authority for the CFTC.
Speaker 22
I guess I will ask this to kind of all the witnesses and give you maybe, don't know how much time I've got. I've got three minutes. That'll give you a lot of time. But the rule making effect on agriculture is gonna be different for a lot of firms and from the financial institutions, obviously. What is the right balance for the regulatory environment when it comes to rulemaking to protect participants without being overly prescriptive?
That would be a good word. And what is the right balance and enforcement to weed out the bad actors and not restrict normal market activity? And, Pricer, if you wanna start, and we'll work our way down, and when I run out of time, I'll just throw up my thumb and say, okay. Go ahead, sir. Oh, okay.
Go ahead, Miss Crichton. That'll be great. Whoever's the expert, I guess you all are. So, Swartz, it's down to you now.
Speaker 6
The right balance is spelled out in the statement of purpose in the statute, and, an illustrative part of that is, responsible innovation. And things like market integrity on the one hand, in addition to, you know, to foster competition is one part of it, but also to protect customers. I think, if the agency governs according to the mandate that it'll get the right balance, and I think it usually does.
Speaker 22
Very good. Anybody else? I've still got a little bit more time than I thought. Y'all went fast, Mr. Price.
Speaker 4
I would guess I'm just gonna, I don't know, that we know the right balance. We've been talking about event contracts here, and the example of the day seems to be betting on the Super Bowl. What happens if we had an event contract that bet on the size of the corn carryout? Then all of a sudden, I might be interested as a traditional end-user. So the balance and where we go with the regulatory environment, I think these markets will innovate faster than we expect them to, and having a CFTC that's there to meet those challenges is terribly important.
Speaker 22
I agree. I agree. Anybody else wanna mister, is it Schiff? And I can't see it at an angle. Okay.
Go ahead. Oh, Mister Schiff,
Speaker 7
Go no. Just gonna say, look. You know, I just think it's important that the rules innovate along with the products. And so you talk here a lot about innovation and new products coming onto the market, and that's so well and good. But if you don't have the rules that innovate along with it, you're gonna have, you know, fraud and manipulation that doesn't go undetected.
Speaker 22
Thank you for that. And, mister chairman, I'm out of question, so I'll yield back to you, sir.
Speaker 1
Gentleman yields back. Now a recognized gentleman from North Carolina, Mr. Davis, for five minutes.
Speaker 23
Thank you so much, Mr. Chair, and to our ranking member. Mister chair, I wanna start out by sharing with you. I'm from Eastern North Carolina, and I believe I heard one of the witnesses today is a dairy farmer in Brooklyn. I don't know that.
Speaker 6
Grandson of. Grandson of. But yes, there was such a thing until okay. Yeah. It's been a while.
Speaker 23
But being from rural Eastern North Carolina, many farmers operate on thin margins, and often face severe weather and global price shocks. My value here is simple. Access to markets must not depend on the ZIP code. So to the commissioner, my question would be, what reforms, regulatory or statutory, would reduce barriers to prevent rural, small scale, or minority farmers from fully benefiting from derivatives markets without increasing road type?
Speaker 3
I think that the reforms that are there may not be any reforms that are necessary. Maybe more direction from Congress in the way of a dialogue. The way the statute's currently constructed, it permits a variety of people to participate in the markets, and it's designed that way very intentionally so that it's not exclusive. Traditionally, the people who have come to the marketplace have been more institutional in nature, but we are seeing an increased participation from the retail community. And the point has been made that maybe that warrants a different conversation about protections, and that may be relevant here.
Speaker 23
Thank you. I've been serving as ranking member, and we've been navigating this cryptocurrency, digital asset space. And my question is, for you, madam commissioner, is if the Senate and House actually come together and we move forward with some sort of regulatory framework agreement providing clarity, what happens if then the CFTC is not authorized?
Speaker 3
Technically, the authorities continue. The responsibilities of the agency continue. And as has been apparent over the last decade, the agency operates as it is intended.
Speaker 23
Now, understand it continues, but what is the net effect is what I'm getting at?
Speaker 3
I think the net effect is that the commission and the staff are left to apply parameters of the act that may not have been designed with current markets in mind. So.
Speaker 23
And it leads to my next question, Dan. I mean, we're here having a meaningful conversation, but what steps are currently being taken regardless of reauthorization or not?
Speaker 3
I think the agency, at least when I was serving, we were able to bring in some experts. We have, but I think the most important thing that this agency does that may be slightly different from other market regulators is we have a constant dialogue with the marketplace. And, the point has been made that is best done when you have a full complement of commissioners. I would agree. And in the absence of updating the statute, I do think that the marketplace, the market participants should feel that there's an open door at the agency such that those who are tasked to carry out the act, even without the benefit of refinements from Congress, can do so in a way that is responding to current. Okay.
Situations.
Speaker 23
And my question to mister Schwartz, and I do look forward to shaking your hand too, by the way. We're here talking about the reauthorization of the CFTC. I know there's been a lot of questions regarding the prediction market, but regardless of all the conversations, I'm trying to understand what are the implications in terms of the functions of the agency if there's reauthorization or not with prediction markets.
Speaker 6
Well, you know, like a broken record, agency capacity is very important. But to pick up on something that Commissioner Stump said, this is a statute that is aging, and even the parts that were revised in Dodd-Frank, the statutory definition of swap includes anything that is or in the future becomes commonly known to the trade as a swap. These sports prediction markets, these sports event contracts are undoubtedly commonly known to the trade as swaps. So the CFTC has the exclusive jurisdiction, but it's obviously something that not everybody, I think, that most people did not anticipate the way this would, the way this would go.
Speaker 23
Well, again, thank you to all the witnesses for being here, and we look forward to continued conversation. This is a very important topic, as we all know and understand. I yield back, Mr. Chair.
Speaker 12
And the chair thanks Mister Davis for his substantial leadership on the digital assets subcommittee. With that, the gentleman from Tennessee is recognized for 5 minutes.
Speaker 24
Thank you. Thank you, chairman. And thanks, Chairman Thompson and Ranking Member Craig, for holding this important hearing, and thank you to all of our witnesses for being with us today. Miss Stump, the whistleblower office, and the customer protection fund are critical tools for the commission. Can you briefly describe how these tools help to protect customers in the marketplace?
Speaker 3
Yes. The whistleblower provision incentivizes those who may have knowledge of a violation to come to the CFTC if that information is, in fact, utilized in a material way to bring an enforcement action with a monetary sanction over $1,000,000. That money is put in a customer protection fund from which the whistleblower may be compensated between 10-30% of the monetary sanction. At the point which the fund reaches $100,000,000, that money then begins to accumulate back to the treasury.
Speaker 24
Thank you. Mister Schwartz, for the past several years, the commission's whistleblower fund has been in danger of running out of money. Can you briefly describe or briefly explain the issue for us and what the consequences of that might be?
Speaker 6
I will try to be brief. So the customer protection fund is used for two things. One is to pay whistleblower awards. The second is to fund the office of the whistleblower, including staff salaries, and it also funds the office consumer education and outreach. If you have an award, and this has only happened a few times, and threat of it has only happened a few times, that would be large enough to deplete the fund down to zero, then you have to furlough the entire staff at the office of the whistleblower.
So the office can't function. If the program shuts down. The other thing that happens is, typically, the contributions to the customer protection fund are small. So there's these incremental additions that get out of the hole, and especially if you're to further debt on a large claim to a whistleblower. You it could take forever to get there.
So it's the furloughing of staff and the deeply difficult task of replenishing the fund for other whistleblower awards.
Speaker 24
While you were general counsel, Congress passed legislation to try to address the issue. Please explain the current fix, if.
Speaker 6
You will. And is it sufficient to address this issue for the long haul? Well, what it does is it creates a second account that can hold up to, I think, $10,000,000, that can be used to fund the office operations, staff salaries, and the like. So that's good. When these patches exist, they are not under threat of furlough.
But congress has had to do this over again. So that's not something that you want to do. I think a permanent fix would be justified, and it also doesn't solve the problem of having to refill the fund in these incremental amounts.
Speaker 6
Yeah. I think when a large monetary sanction that could lead to a whistleblower award is collected, it should or at least up to 30% of it that could be the top level whistleblower award should continue to be accessible to the commission to use to pay for awards that large, so it won't hobble the office.
Speaker 24
Thank you. And mister Schwartz, has the, or yes, mister Schwartz, has the CFTC's expired authorization since 2013 created perceptions of instability that discourage international participants from listing products on the US exchanges?
Speaker 6
Well, I think, because of the nomenclature, it probably does make certain people nervous. It certainly sounds like the commission is about to go out of business or is, you know, more than a decade overdue. So I agree with commissioner Stump when she said some other way of doing this. It would probably be preferable.
Speaker 24
Miss Crichton, in what ways might foreign regulators exploit the US reauthorization gap to attract swaps and futures volumes, such as through lighter touch rules or on clearing or data reporting, thereby gaining derivatives market share from American firms?
Speaker 5
Yeah. Thank you. Look, I think we're well regulated in every jurisdiction in which we operate, and we think the system of substituted compliance and deference works particularly well.
Speaker 12
The chair threw both Mr. Harris and Mr. Rose for a loop by taking them out of order. The chair begs their indulgence, we'll provide them both a personalized tour of the world's only Corn Palace, as an apology gift. With that, I've already been. Yeah. Very good.
Mister Vinman, you are recognized.
Speaker 25
Thank you, Mr. Chairman, and thank you to all the witnesses for appearing here today. So the thing I hear most from the farmers in my district is that input costs are too high. Costs for seed, fertilizer, repair parts are, frankly, just too high. They've been high for years, and that affects prices at the grocery store. So my question for each of you, and we can go in line starting from Mrs.
Stump, I'd like to ask each of you what is the single most important thing that this committee can do to lower the cost for Americans at the grocery store?
Speaker 3
Well, that one may be beyond my expertise. But I will say with regard specifically to the Commodity Futures Trading Commission, I think your oversight is very important to ensure that the markets continue to function in a way that those input provide those that service your farmers are able to take advantage of the markets to manage their own price risk?
Speaker 4
I think I mentioned earlier that the market price is uncertain negatively. And think that the things that the CFTC regulates and the derivative markets which it oversees, particularly in the things that I deal with every day, corn, beans, wheat, the things that we the food and the fiber in the United States. Providing certainty in the regulatory environment, certainty for the participants in the market would help.
Speaker 5
Thank you. I think to add on from my seat, the focus on margin, particularly a well-calibrated margin regime, is critically important for us to provide the services that we need to, particularly to the end user community.
Speaker 6
I will add that in the time of rising prices, because of reasons, it would be particularly unhelpful if there were manipulation in the markets that you're describing. So I think ensuring that the CFTC is able to police effectively its markets, be it the enforcement program or market surveillance. I think that's the kind of thing that the agency can do, and I think that's the capability that Congress should ensure that it has.
Speaker 7
Yes. The CFTC needs to have adequate resources and staffing to fulfill its core mission, and the committee needs to ensure that the CFTC's focus is its core mission, which is ensuring that prices for commodities reflect supply and demand and non excessive speculation.
Speaker 25
Thank you, and I appreciate that. And I appreciate your comment on predictability, mister Prossert, because, frankly, I think one of the areas that we see a lack of predictability is the tariff regime and the effect it's having on farmers in my district and around the country. But I do wanna turn my attention briefly to prediction markets and event market regulation. And my question is, are there any topics, and I'll start with Mister Schwartz. Are there any topics that are out of bounds?
I mean, ultimately, some people can certainly perceive these as bets on just about everything and, like, how many school shootings there might be. As we all know, the president is both aged and infirm. People could be betting on whether he's gonna make it through his current term. Are there things that are out of bounds for these markets?
Speaker 6
Well, look. I wouldn't list those contracts if I had a futures exchange. I think it would be helpful if the CFTC has some direction from congress on this score. It's a delegation to examine topics like that. And if the CFTC is, if the CFTC is in need of further direction on that point, then I think the policy question has to come back to congress to resolve.
Mister Schiffrin?
Speaker 7
I think there are, at least there should be. Right? At the statute, it says that event contracts on things like gaming aren't permissible, and the event contract is listing a bet on who's gonna win the football game. It should be pretty easy for the CFTC to say this is not the type of event contract that is permissible. And when congress was debating Dodd Frank, senator Lincoln said exactly that, that that's why the language about gaming was included in the statutory authorization because, otherwise, you'd have people doing event contracts on the Super Bowl.
That's literally the example that was given, one of the examples that was given. Now here we are. And so I think the safe decision needs to make clear that that's not appropriate.
Speaker 25
So thank you for that. And, obviously, I think this is meant to illustrate the fact that there are and there should certainly be areas that are out of bounds for these contracts. And we've talked about gambling. We've talked about predictions on some terrible events, and we have a role to play. So thank you for that, and I yield back.
Speaker 11
Thank you, mister chairman, and thank you to all the panel for your presence and your expertise today. You know, as a pastor for the last 36 years, I know firsthand that churches oftentimes operate with very limited administrative resources. And for this reason, many churches and nonprofits use common risk management tools like swaps to help manage retirement plans and educational or charitable endowments, providing long-term financial stability for these funds. However, due to the broadened definitions of the Dodd-Frank Act in 2010, these organizations, as you know, unexpectedly found themselves swept into a regulatory category that was never intended for them. And so, mister Schwartz, I just wanna ask you if you can take a moment to explain how Dodd Frank's broad definition of commodity pool unintentionally swept these ministry and nonprofits into a Wall Street regulatory framework.
Speaker 6
Yes, sir. The definition of commodity pool includes any collective investment vehicle. And so if it were pension plans and other entities that had an interest in the pool like you're describing, it would be a collective investment vehicle that includes any, quote, unquote, one of a series of commodity interests. So it's a low bar to clear for any investment vehicle like you're describing, and that's how that ended up in that category. Okay.
Speaker 11
Thank you. Well, and the fact is, as I'm sure we can all agree, and as already mentioned when my colleague from Indiana mentioned it earlier, church pension plans and charitable endowments are not the same as Wall Street hedge funds, and were never intended to be affected by this law. And, Commissioner Stump, during your time as a CFTC commissioner, did you ever recognize the tremendous burden and uncertainty that these classifications were placing on churches, their retirees, and other nonprofit organizations?
Speaker 3
Yes. Actually, when Congress asked us to provide assistance in designing refinements that might be necessary in the context of reauthorization, I believe all of the commissioners, while we didn't vote on this, we agreed that this was probably an unintended consequence of, and I would just like to point out again, regulating in the midst of a crisis oftentimes results in these sorts of things. So it's best to manage these things outside of a time when we are hurried.
Speaker 11
Exactly. And, prior to your time as a commissioner, the CFTC did issue a no action letter in 2014 offering temporary relief for church pension plans, and, in 2017, no action letter offering relief for university endowments. But these letters, of course, can be revoked at any time. So I guess my question is, in your view, should faith-based nonprofits, which operate on long-term stewardship models, be forced to rely on temporary administrative relief instead of having clear statutory certainty from Congress?
Speaker 3
Oh, absolutely not. There should be in the case that no action relief is a useful tool for the agency, it is best if we can have congress speak to, correcting it or have the agency and by that, I mean, their commissioners vote to change it. But in this case, I do not believe the commissioners can vote to change it without an act of Congress.
Speaker 11
Well, and I will say, as Congress undertakes the CFTC reauthorization, are there any specific, in the last minute we have, specific recommendations that really either you or Mr. Schwartz would be willing to offer us to ensure that religious charities, church pension plans, and other nonprofits are shielded from these regulatory requirements that were never intended for them? Either of you.
Speaker 6
You could either, I guess, two ways put in a carve out from the definition of commodity pool, or you could direct the commission to issue rules and regulations to ensure that that's the result that comes out of it. Okay.
Speaker 3
And I would expect that the agency would do so very quickly because I am unaware of any commissioner that has felt that this was the intended result.
Speaker 26
Thank you so much, Mr. Chairman. Before I begin my remarks, I'd like to submit for the record a letter from the Indian Gaming Association. I wanna start by saying something that may get overlooked in this issue, but when we talk about the CFTC, we're also dealing with tribal sovereignty. I have seven sovereign nations in my district. Some of them operate gaming operations.
For me, being here from Southern New Mexico and the tribes that are in our district, including Mescalero, Acoma, Jicarilla, Laguna, Santa Ana, and so many others. They depend on us to uphold our trust and treaty obligations as a nation to them. And that includes protecting the gaming compacts that they negotiated with the US government in good faith. Now, in New Mexico, travel gaming isn't just a business for the tribes. It's jobs for all New Mexicans.
It provides for education funds, for housing. It's the foundation of the economy for rural and Native American communities. And when it comes to sports betting, the rules are simple. In New Mexico, only happens at tribal casinos under tribal, federal, and state regulation, with strong safeguards in place to ensure tax revenue support state and tribal priorities, prevent underage betting, and protect those who struggle with gambling addiction. But now we're seeing that companies are trying to get around those rules by calling sports bets something else, event contracts, or prediction markets.
And they're using the CFTC's process to do so. So from where I sit, and from where New Mexico tribes sit, bets on sports, regardless if they happen inside the casino or not, should be treated and regulated as sports betting. Now what worries me is that the CFTC allows these companies to move forward unchecked, and we're gonna end up with unregulated and unsafe online sports betting that's offered by unlicensed operators with none of the protections the tribes and the states have spent decades building and have to follow. And the people who lose the most in my district are those tribes who have very little, if any other economic means. So I want to dig into that.
And, mister Schwartz, can you help me understand why a contract on the outcome of a sporting event is not considered gambling? And where do you draw that line?
Speaker 6
It comes from the statutory definition of swap that Congress passed in the Dodd-Frank Act. It was not trying to be narrow or nuanced. This was coming out of the financial crisis. It felt important to give the CFTC broad jurisdiction. But because there are not those kinds of nuances in the definition, it would sweep in quite a lot.
As I mentioned before, I'm not sure where you were present for it. The definition includes anything that is or in the future becomes commonly known to the trade as a swap, and we have them listed on designated contract markets offered by futures commission merchants, cleared by derivatives clearing organizations. If you look at the CFTC's product submission webpage, you see all of the submissions on this subject, and they're submitted as swap. So I don't have any doubt that they fit within Mhmm. That definition, but that's not the same thing as what the policy should be.
Speaker 26
Sure. So do you agree then that the intent essentially of providing a product like this is akin to gambling, and should be regulated likewise?
Speaker 6
I don't think I'm the right person to answer that question. Why is that? Prefer to leave policy to the policymakers.
Speaker 26
Okay. Well, you're our issue expert. So the policy experts can't make the policy without your expertise.
Speaker 6
Yeah. I, you know, I'm glad to provide whatever legal assistance that I can. Okay.
Speaker 26
Thank you so much. I appreciate it. One other question, Schwartz. Do you believe that regulating gambling is part of the CFTC's core mission? Is that something that you feel the CFTC is doing today?
Speaker 6
It, this is an old issue. It used to be illegal in many or most states to trade futures contracts on corn or wheat. And there's just a long running debate on where the line should be between gambling and derivatives trading. And this is just the latest iteration of that, I think. And I think policymakers should look at it through the same lens.
Speaker 26
Thank you, Mr. Schwartz. I appreciate your answers. And, you know, I'll just end with this. If online sports betting suddenly shifts into the CFTC's purview, the traditional system for these types of activities gets bypassed along with tribal compacts that the US government has made. It's gonna impact tribal revenue.
It's gonna have an impact on the tribal authority. And in New Mexico, that's a real impact on our schools and our rural communities, and those casinos that depend on that revenue. So this has a huge impact on rural New Mexico, has a huge impact on tribes. And this committee has a responsibility to make sure that the CFTC is enforcing the laws Congress has passed. Obviously, make sure that we modify those that we understand are outside of the. And so, as we discuss reauthorization, I hope we're gonna continue to protect consumers and that we stand with all our tribes across the country and those in New Mexico.
Thank you, Mr. Chairman. I yield back.
Speaker 27
Thank you, Mr. Chairman. I thank all of our witnesses for being here today. Good to see you, Mr. Prosser. Now we saw each other at the K State football game earlier this fall. Go cats.
That's it precisely. He took the words out of my mouth. You know, the CFTC plays a critical role in the U.S. economy, assuring our markets function as they should. For farmers, ranchers, and ag producers in the Big 1st District of Kansas and throughout the country, these markets are essential risk management tools that allow them to hedge a lot of uncertainty and secure prices in a very volatile environment. The CFTC's oversight helps keep those tools reliable and effective. However, it's been mentioned many times, the agency has gone over 15 years without a full reauthorization.
It's way over past time to update and reauthorize. Just a handful of questions. Thank you all for being here. First for you, Mr. Schwartz. Commodity futures and swaps markets are global markets. In fact, one of the largest clearinghouses registered with the CFDC is located in London.
Can you speak to the importance for global regulators to be able to coordinate, share information with, and learn from one another as they surveil and regulate these markets?
Speaker 6
Yes. You put your finger on it. These markets are global, and things like systemic risk and wrongdoing don't recognize international borders. But on the other hand, there are differences in between the localities. Right?
They may have different practices in one part of the world. There's certainly different laws all over the world. And the CFTC's jurisdiction is primarily domestic. So it's absolutely critical that they be cooperating with foreign regulators, and information sharing is inherent in that.
Speaker 27
Would in your mind, would detailing staff to and from foreign regulators like the UK or EU support the global sharing of knowledge and experience, and ultimately allow the CFTC to best serve the markets that, at the end of the day, helps our Kansas and our ag farmers?
Speaker 6
Having those kinds of perspectives at the ready without having to engage in some kind of international process would be, I would think, very helpful to the agency.
Speaker 27
Yes. And at the end of the day, would help our ag producers, right? I mean, which is sure. Which matters for these markets. Thank you. Quick question for you, Miss Crichton, and good seeing you again.
The protection of customer funds at an FCM is one of the bedrock principles for futures regulations. Can you briefly talk about how that process works both day-to-day in the event of a bankruptcy? And what happens if funds are held in a segregation account if those funds are insufficient? How are customers made whole?
Speaker 5
Sure. Nice to see you as well, and thank you for the question. You're right. I think one of the most important simple principles that we focus on as an FCM is our ability to segregate assets and protect client assets. And when we think about some of the newer structures that are being proposed, these sort of direct clearing models, we have to take a very careful look at how our assets are protected in those new structures.
Customers move from being a customer of an FCM and having those protections to being a counterparty to the clearinghouse where, in the event of a bankruptcy, they become a general creditor. And so that is a very distinct difference in those two models, and it's one that we have to pay careful attention to. And the customer protection regime is one that we focused on quite heavily within the FTX discussion. Right? When you think of these new structures, what does that actually mean?
So we segregate assets. We hold them in accounts designated for the benefit of customers in the event that we were ever to default. And if there was ever a shortage of assets in those segregation funds, one of the things that we're looking for is what we call the Griffin Fix, and is kind of cementing in statute the prioritization of customers. In the event that there were a shortage, they would be prioritized over other general creditors of the FCM.
Speaker 27
it? Last question, entirely different direction, up for you, mister Prosher. In your testimony, you mentioned convergence and its importance to the real-world work of moving ag commodities around the planet. Can you speak to what convergence is and why that is important to the work that Schueller does?
Speaker 4
The idea that, ultimately, these derivatives derive their value from a real commodity, the things we make food and fiber out of, is central to why they work as risk mitigation tools. And this is why the commission has a role to play in physical markets, because they do, as we come into delivery, help us go to a benchmark price that reflects the physical price of the commodities that these represent. And because of that process, they become integral hedge tools for producers as well as consumers.
Speaker 27
Great. Yeah. Well, thank you all for being here. I yield back the balance of my second, mister chairman. Thank you.
Speaker 16
The witnesses' time today for this important discussion on reauthorizing the Commodities Futures Trading Commission. I represent a district in Central and Southern Illinois. I come to this hearing really with a clear priority, which is making sure our derivatives markets continue to serve the real economy, especially the farmers, grain handlers, biofuel producers, and cooperatives who rely on these markets every day. For producers in my district, futures markets are not abstract financial tools. They are lifelines.
Risk management tools that help determine whether a family farm survives in a volatile season like we have right now, whether a grain elevator can offer competitive bids, and whether rural communities can count on stable economic conditions. Right now, we're asking the Commodities Futures Trading Commission to do more than ever, at a time when it has less capacity than ever. The agency has just one sitting commissioner and four vacancies, an unprecedented situation for a regulator overseeing trillions of dollars in market activity. As the Commodity Futures Trading Commission is asked to keep up with rapid changes in technology, data systems, digital assets, and increasingly complex clearing operations. I support responsible innovation, but we have to be honest about the trade-offs.
If growing responsibilities aren't matched with real resources, we risk weakening oversight where it matters most, for my district, our agricultural markets. So as we move forward with this reauthorization, my hope is simple, that we give the Commodity Futures Trading Commission the tools and resources it needs to keep up with today's markets, and that we never lose sight of the farmers and rural businesses who rely on these markets every day to manage real world risks. Central and Southern Illinois helps feed and fuel this country, and our producers deserve strong, modern, and well-regulated markets that put their needs first. I appreciate our witnesses being here today, and I just, again, have a couple of questions. One, I first wanted to direct to Ms.
Crichton. And my question for you is, as margin and collateral requirements continue to evolve, how can reauthorization promote stability and sound risk management while also accounting for the liquidity constraints faced by smaller agricultural firms?
Speaker 5
Thank you for the question. I'm going to separate those things a bit. And I think referencing Commissioner Stump, I think the CFTC has the ability to act and engage with us on margin now. And I'll say kind of parallel to that is it is incredibly important to reauthorize, right? But kind of specifically on your question on margin, it serves as what we think of as the first line of defense.
It is the capital, it's the collateral that sits with the FCM to mitigate a risk issue, to be the protections for the ecosystem in the event of a default. And when margin levels go too low and then we hit a period of real stress, what we find is an incredible stress and strain on the system, where customers and users have to quickly source cash, which can have a broader destabilizing effect. So as margin levels continue to drift lower, one of the things that we think is most important is we think about recalibrating what those margin levels are, so they don't drift so low. And if you have the ability for kind of more healthy projections, you have the ability then to source more stable funding. So you're not looking at sourcing additional cash when everyone else is, and cash is just more expensive.
Right. So I don't think it's necessarily intuitive when we say higher or stronger margins. A more robust margin regime is one of the right answers, but we think it is because it gives that stability and durability of funding. And so you're not raising your costs when you really do not want to.
Speaker 16
Okay. Thank you for that. And I'm gonna squeeze in maybe one more question. Mister Schifrin, what improvements to transparency do you think Congress can or should prioritize in this reauthorization to better support commercial end users' understanding of market conditions and risk?
Speaker 7
Thank you for the question. Well, I think that if the CFTC is going to take on newfound responsibilities in emerging markets, it needs to make sure that investors in those new and emerging markets have the disclosures that they need to understand the risks. So when you're talking about things like twenty-four seven trading or prediction markets or perpetual futures, those are new and novel products that have new and novel risks, and they can be should make sure that investors have the disclosures that they need to understand those products.
Speaker 16
Is there anything specifically that you might recommend that we can in the reauthorization that we should be doing to get to that? Just to communicate more around the risks of some of these emerging markets?
Speaker 7
Nothing comes to my specific. I'm happy to work with your office and get back to you on that.
Speaker 4
There defer is opportunities to continue for the commission to publish data about the market participants, who's buying, who's selling, and the cadence at which they do that, and we would encourage that to become more frequent.
Speaker 28
Thank you, chairman, and thank you, ranking member, for holding this hearing today, and thank you to the witnesses for your time and expertise and the sacrifices you make to be here. Don't go unnoticed. We appreciate it. Mister Schwartz, definition of swap is rooted in a broad statutory definition passed as part of the Dodd-Frank Act, which was further defined by the CFTC and the SEC. What are some of the possible consequences of poorly considered efforts to narrow the definition of a swap?
Speaker 6
Well, if it were narrowed too far, I think, financial innovation oftentimes includes regulatory avoidance. You could get into a situation where the CFTC didn't have jurisdiction that it needed. You could have systemic risk problems. You could have anti-fraud, anti-manipulation problems. So it is that that is something that congress and the CFTC need to consider very, very carefully.
Carefully.
Speaker 28
Okay. Thank you. And, staying with you, Mr. Schwartz. It's my understanding that the Environmental and Energy Markets Advisory Committee was created by the Commodity Exchange Act, while the other four advisory committees were created by the CFTC pursuant to the Federal Advisory Committees Act. Despite all being advisory committees, because EMAC was created in a different way, EMAC is subject to different rules.
How does administering the advisory committees according to two different sets of rules unnecessarily complicate agency operations? And can you talk more about some of the differences between the rules?
Speaker 6
Sure. Thank you. It is an administrative burden. There is, I can tell you, one expert in the Federal Advisory Committee Act in the office of the general counsel. She spends probably more than 50% of her time on this, and there's two sets of rules.
It doesn't need to be so. I mean, some of the differences are under the FACA, you have to submit various reports, documents, charters for approval by GSA. You don't have to do that for the EMAC because it's exempt from the FACA. It's created differently. There are different rules as far as the number of members from each committee.
I don't know that there is justification that anybody sat down and thought about before they made two different sets of rules. It would just be easier to process if there were one set of rules for everyone.
Speaker 28
Okay. I appreciate your perspective on that. As we work to reauthorize the CFTC, we have the opportunity to make improvements to ensure maximum efficiency toward its mission to promote the integrity, resilience, and vibrancy of the U. S. Derivative markets.
One area, as Mr. Schwartz spoke about where I think we can make an improvement is streamlining the advisory committee structure so all advisory committees operate equally. By all counts, the advisory committees serve a great purpose and provide great insight to the commission, and it doesn't make sense that we have one advisory committee operating with different rules. To fix this, I'll be introducing the CFTC Advisory Committee Improvement Act, will eliminate the single authorization for EMAC, and replace it with a generic authorization for all advisory committees. I know in DC we like to make things complicated sometimes, but I think by standardizing the operating structures, we can make things better for the American people.
I look forward to continuing to work with my colleagues on the CFTC reauthorization, and I'm gonna let you guys off a minute and a half early. I yield back.
Speaker 12
Very good. Thank you, Mr. Taylor. Mister Davis, any closing comments for the record?
Speaker 23
Thank you, Mr. Chair. Of course, when we talk about today's hearing, we've heard from some amazing witnesses on many issues and challenges confronting the CFTC. Mister chair, we've received several statements from the American Gaming Association, Indian Gaming Association, the NFL, all around the issue of event contracts on sporting events, and ask if it's without unanimous consent for these statements to be entered into the record so that they could be shared with members. And.
Speaker 23
Yes. And, lastly, I just wanna thank you again, and thank our witnesses.
Speaker 12
A couple of our witnesses noted the strong tradition of nonpartisan decision-making at the commission. Of course, we expect that at the staff level, but that's also been true at the commissioner level. Just really good technical expertise. I think we've also seen that spirit of nonpartisanship and bipartisanship today. As people talk about the importance of the CFTC, we have had words used by our witnesses and by members, nimble, innovative, effective, and that's really why reauthorization is so incredibly important.
If we wanna continue to have this, the best little regulator that America has never heard of, as mister Schwartz said, continue to be a leading example of quality principles based regulation, then congress better do our gosh darn job. And I think today was a really good additional step toward that goal. With that, under the rules of the committee, of course, the record's gonna remain open for 10 days, so our witnesses and members can augment the record. And unless anyone else has anything pressing, the hearing on this committee on agriculture is now closed. Thanks.
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