CFTC Uses Microsoft AI Tools to Surveil Crypto and Prediction Markets, Chairman Tells Congress

Key Takeaways:

• CFTC Chairman Michael Selig confirmed the bureau is deploying AI and automation tools to surveil markets with a 20%-reduced unit since FY2024.
• Six Polymarket accounts reportedly earned $1.2 cardinal betting connected U.S. Iran strikes hours earlier the February 28th action, raising insider trading alarms.
• Selig called bipartisan crypto marketplace operation authorities nether the Clarity Act essential, urging Congress to nonstop the measure to the president’s table successful 2025.

Selig Calls Clarity Act Essential arsenic CFTC Faces Congressional Heat Over Polymarket Insider Trading Fears

Chairman Michael Selig, sworn successful astir 100 days earlier the hearing, testified that the Commodity Futures Trading Commission (CFTC) has authorized the usage of Microsoft 365 Copilot crossed its workforce and is gathering caller AI-driven surveillance systems to emblem fraud, marketplace manipulation, and insider trading. The agency’s headcount has dropped from 708 full-time employees astatine the extremity of fiscal twelvemonth 2024 to astir 543, a simplification of much than 20%. Selig defended the cuts, telling the sheet the bureau is moving much efficiently than ever.

Ranking Member Angie Craig of Minnesota pushed backmost directly. Craig argued the CFTC cannot adequately oversee integer commodity trading and prediction markets with staffing levels beneath what the archetypal Trump medication had itself requested. She called for the bureau to beryllium afloat funded and said Congress ne'er intended for a azygous commissioner to tally the CFTC alone. Selig is presently the lone sitting commissioner, with 4 seats vacant.

Multiple members questioned Selig astir a signifier of well-timed trades connected Polymarket, Kalshi, and different platforms tied to delicate authorities actions. Rep. Jim McGovern of Massachusetts cited astir $500 cardinal successful lipid and equities futures placed conscionable earlier President Trump posted connected Truth Social astatine 7:04 a.m. connected March 23rd that the U.S. had begun ceasefire talks with Iran. Rep. April McClain Delaney and others referenced a Reuters study that six recently created Polymarket accounts earned astir $1.2 cardinal betting that U.S. airstrikes connected Iran would occur, with those accounts funded wrong 24 hours of the strikes.

Selig repeated a zero tolerance argumentation connected insider trading passim the proceeding but declined to corroborate oregon contradict whether the CFTC is investigating immoderate circumstantial trades, saying doing truthful could compromise progressive investigations. He said the agency’s enforcement division, led by David Miller, a erstwhile CIA serviceman and Southern District of New York prosecutor, is actively staffing up.

On digital assets, Selig expressed beardown enactment for the CLARITY Act, bipartisan crypto marketplace operation authorities this committee has advanced. He told members the measure is indispensable to extremity years of regulatory ambiguity that has pushed builders and innovators offshore. He said the CFTC and U.S. Securities and Exchange Commission (SEC) person already signed a associated mentation clarifying which crypto assets suffice arsenic securities and which arsenic commodities. The agencies besides entered a memorandum of knowing to coordinate surveillance, accusation sharing, and rulemaking.

Selig addressed prediction markets astatine length. The bureau issued an beforehand announcement of projected rulemaking successful March 2025 soliciting nationalist remark connected however to modulate lawsuit contracts, which are derivatives traded connected registered exchanges. He told the committee the CFTC has not allowed contracts tied to war, terrorism, oregon assassination connected its regulated platforms, but declined to prejudge the result of the rulemaking process. Several Democrats, including Rep. Jim Costa of California and Rep. Teresa Leger Fernandez of New Mexico, argued that prediction market sports contracts straight undermine tribal gaming compacts and authorities sovereignty.

Rep. Austin Scott of Georgia raised concerns astir decentralized exchange ( DEX) platforms specified arsenic Hyperliquid, which lists perpetual contracts connected crude lipid without segregated funds, marketplace surveillance, oregon U.S. oversight. Scott said volumes connected those platforms whitethorn scope 200,000 orders per 2nd and could beryllium affecting home gasoline prices. Selig said the CFTC is monitoring those offshore markets and wants to bring that enactment backmost nether home regulation.

Selig told the committee the bureau has besides taken steps to clarify the superior attraction of outgo stablecoins, issued guidance connected tokenized collateral, and outlined obligations for U.S.-based bundle developers gathering connected blockchain infrastructure. He called authorities the lone mode to fastener successful those protections semipermanent against aboriginal administrative reversals.

The proceeding besides covered rising fertilizer prices, concerns astir 24-hour trading models for cultivation commodity contracts, the CFTC whistleblower fund’s backing stability, and a propulsion by aggregate members to codify existing no-action letters that support religion pension plans and assemblage endowments from commodity excavation relation registration requirements.

Committee Chairman GT Thompson of Pennsylvania closed by saying helium and Craig volition nonstop a missive to the White House urging the punctual information of qualified individuals to capable each 4 vacant commissioner seats connected a bipartisan basis. The proceeding grounds volition stay unfastened for 10 days.