A newly emboldened regulator is puffing its chest out in Washington. Often referred to as the little brother of the much larger Securities and Exchange Commission (SEC), and famously described by one of its chairmen as “the most important regulator most Americans have never heard of,” the Commodity Futures Trading Commission (CFTC) has quickly found itself playing the protagonist—or antagonist, depending on who you ask—in two of the country’s loudest policy debates: on prediction markets and cryptocurrency.
Last week, the CFTC asserted in an amicus brief filed with the U.S. Circuit Court of Appeals for the Ninth Circuit that the agency has exclusive jurisdiction to regulate prediction markets—a challenge to states’ claims that speculating on the outcome of sporting events using futures contracts is akin to gambling and therefore subject to the authority of state gambling regulators. The brief is part of a larger fight between dozens of state regulators and the CFTC, both of whom claim to have authority to regulate contracts on events like the Super Bowl, March Madness, and the Olympic Games. “To those who seek to challenge our authority in this space, let me be clear, we will see you in court,” CFTC Chairman Mike Selig said in a statement about the filing—though he notably declined to mention sports contracts specifically in the minute-long video. The statement triggered responses from politicians like Utah Gov. Spencer Cox, Illinois Rep. Sean Casten, and former New Jersey Gov. Chris Christie, all of whom protested that sports contracts should be considered gambling products and subject to the same state regulations as traditional sportsbooks.
As the crypto industry goes mainstream and legislative efforts to establish a comprehensive regulatory framework for digital assets make their way through Congress, the CFTC has similarly established itself as the primary overseer of that multi-trillion-dollar market. While crypto regulation has existed for years in an opaque no man’s land between the SEC and CFTC, Senate agriculture and banking committee drafts of a highly anticipated market structure bill would formalize the CFTC’s jurisdiction over spot crypto markets, expanding the agency’s authority over yet another fast-growing and technologically complex financial sector. That legislative effort has seen bipartisan backing thus far and could reach the president’s desk by this summer. Add that to the trillions of dollars in swaps placed under the CFTC’s authority in 2010 by the Dodd-Frank, and the little brother of the SEC doesn’t seem all that little anymore.
Agricultural roots.
The agency now at the center of fights over crypto and sports betting, however, was created to do something far more mundane: police fraud in agricultural commodity markets. More than a century ago, in response to manipulation and fraud in grain trading, Congress established the Grain Futures Administration within the U.S. Department of Agriculture as the country’s first commodities regulator. That regulator’s authority was expanded further in 1936 by the Commodity Exchange Act (CEA), which granted it oversight of additional commodities like cotton, eggs, rice, and butter and renamed it the Commodity Exchange Administration. As futures markets grew rapidly in the early 1970s—expanding into metals, energy, and other non-agricultural commodities—Congress established the CFTC in 1974 as an independent agency with exclusive jurisdiction over commodity futures and options, modeled after the SEC with five commissioners appointed by the president. “It was clear that the CEA at the time wasn’t adequate to address those products, so it was amended to expand the jurisdiction of this new agency,” Gary DeWaal, a retired financial markets lawyer who worked in the CFTC’s enforcement division in the 1980s, told The Dispatch.
From there, the agency’s reach grew as the markets it oversaw expanded. Financial futures on interest rates and stock indexes emerged in the 1980s, transforming the CFTC from an agricultural regulator into a financial one. But when over-the-counter (OTC) derivatives like interest rate swaps and credit default swaps hit financial markets in the 1990s and 2000s, Congress pulled back—exempting the OTC market from CFTC oversight entirely through the Commodity Futures Modernization Act of 2000. That decision looked catastrophic eight years later, when unregulated credit default swaps helped accelerate the 2008 financial crisis. Congress responded by passing the Dodd-Frank reforms, which handed the CFTC authority over a swaps market now worth roughly $490 trillion in notional value.
Importance to retail investors.
It was this authority over swaps that first transformed the CFTC from a quiet, behind-the-scenes agency to one with real institutional heft, according to one former commissioner of the CFTC, who now works in the private sector and was granted anonymity to speak candidly. “It took on such a large role after Dodd-Frank,” the former commissioner told The Dispatch. “And even then, I don’t think people really appreciated how much the agency was already overseeing given its size and budget.”
The CFTC has played an important role in regulating U.S. financial markets for decades, but the markets it oversees have—until recently—been overwhelmingly outside the orbit of retail investors and everyday Americans whose 401(k) accounts are invested in SEC-regulated equities and bonds, not complex CFTC-regulated commodity futures. “People are starting to see [the CFTC’s] importance because of these issues that seem to be more prominent in the public eye,” the former commissioner said. “It’s evolving in its stature, but in my mind, it’s probably past time that they are being seen as important of a regulator as they are, because they do have such a broad remit over such a large swath of the economy.”
Despite the CFTC’s gradual expansion of authority, the agency has seen little growth in its budget and headcount, particularly compared to the SEC. While the SEC worked with a budget of $2.1 billion and staff of more than 4,000 in fiscal year 2025, the CFTC operated with a $371 million budget and fewer than 600 staff members during the same period. That discrepancy has left some in the regulatory space to wonder if the agency is equipped to handle authority over both fast-growing prediction markets and the country’s digital asset sector. “The real remaining issue the CFTC has is funding discrepancy,” a former policy adviser at the CFTC, who was not authorized to speak publicly, told The Dispatch. “They don’t have a funding stream that gives them the ability to just solely grow in tandem with their markets.”
Unlike the SEC, which is funded largely through fees charged on securities transactions, the CFTC is entirely funded through congressional appropriations, and its headcount is capped by Congress. As a result, its budget has not grown in tandem with growth in the markets that it oversees. Congress, to its credit, has recognized this discrepancy, and current drafts of digital asset market structure legislation include provisions that would expand the agency’s funding through a fee structure similar to that of the SEC. “The CFTC has done well with incremental increases in staff and funding, and I see that as the way this should work again,” the former commissioner said. “They’re going to need to hire more staff, they’re going to need some more money. But we’re not talking about doubling or tripling their appropriations at the start—this should be an incremental change to the agency so that they can keep up too.”
What the agency does have, despite shortfalls in funding and headcount, is the expertise to expand its oversight and pursue new rulemaking. “Do they have institutional knowledge? You betcha,” DeWaal said. That expertise will be particularly important should a market structure bill pass, which would require the agency to undergo its largest rulemaking effort since Dodd-Frank. “The agency is very familiar with the rule writing process. It’s very familiar with having to deal with complex and technical language from Congress and trying to translate it into ways that can work in derivatives markets,” Daniel Davis, a partner at the law firm Katten and former general counsel at the CFTC who was at the agency during the final years of Dodd-Frank rulemaking, told The Dispatch.
Solo leadership.
That doesn’t mean that the agency won’t need to build out new capabilities and expand its offices. “There will need to be more resources devoted to the agency,” Davis said. “That’ll be in the policy divisions that need to do the rulemaking. It’ll be in the surveillance functions that need to monitor the markets. It’ll be in enforcement.” But former CFTC regulators don’t seem particularly worried about the agency failing to take on the challenge. “The agency has the capacity,” the former commissioner said. “I have no doubt that, given the added responsibilities, that the agency will handle it. I don’t see anything breaking under the oversight of this agency, and certainly under its current leadership.”
That leadership, however, currently consists of only one man. While the CFTC was designed to be run by a bipartisan commission of five presidential appointees, the agency now has a single leader, Chairman Michael Selig. Early in his career, Selig clerked for former CFTC Chairman J. Christopher Giancarlo, and prior to his own nomination as chairman, served as chief counsel for the SEC’s cryptocurrency task force. Though the commission’s four remaining seats remain vacant, the Trump administration is reportedly in the process of considering additional nominees.
For the time being, however, the presence of a single commissioner doesn’t necessarily diminish the agency’s capacity—vacancies in the commission do not impair its ability to exercise powers—and in some cases it could streamline the agency’s decision-making. Whether that’s a good or bad thing is in the eye of the beholder. “I am a firm believer in the importance of a bipartisan commission,” the former commissioner said. “Sometimes, when putting policy into place, there shouldn’t be a fast lane.” So while under Selig’s solo leadership the CFTC can likely get many things done faster, those decisions may be less durable in the long term. “It probably streamlines things, but not always in healthy ways,” the former policy adviser said.
The tussle over prediction markets.
That streamlined process was on full display last week when Selig decided to appeal directly to the public in his video statement—a move that was criticized by some lawmakers. “Chairman Selig is unnecessarily debating the technical bounds of a ‘swap’ when Dodd-Frank’s legislative history is clear that sports-related event contracts are viewed as pure gambling, serve no legitimate commercial purpose, and have no place in the CFTC’s regulatory perimeter,” Casten, a Democrat who serves on the House Financial Services Committee, told The Dispatch in a statement. “Prediction market platforms are proactively and aggressively suing regulators in Illinois, Utah, and Connecticut, which underscores that Chairman Selig’s opinion is on shaky legal grounds and willfully ignores Congressional intent.”
But despite pushback from state regulators, Selig’s view that the CFTC has jurisdiction over prediction markets is shared by many of the agency’s former staff. “This looks like the type of financial instrument that the CFTC has been looking after and regulating for a while,” Andrei Kirilenko, former chief economist of the CFTC, told The Dispatch. The agency first recognized prediction markets more than three decades ago when it allowed the University of Iowa’s Electronic Markets to operate through issuance of a no-action letter (a formal statement that agency staff will not recommend enforcement action), and the CFTC was given explicit statutory authority over event contracts in section 745(b) of Dodd-Frank in 2010. “Congress gave the CFTC authority over event contracts,” the former commissioner said. “It’s pretty clear where the jurisdictional lines lay here. And I’m not surprised that Chairman Selig came out strong and sent in an amicus brief.”
Whether the CFTC wins its fights over prediction markets and crypto or not, the agency’s role in the broader economy has already outgrown its reputation. “I don’t think people fully appreciate how much better our economy functions when we have well-functioning derivatives and securities markets,” Davis said. When businesses are able to hedge risk using these markets—for example, an airline purchasing oil futures to protect against price shocks—it allows them to better calculate risks and pursue entrepreneurial activity. So while, for most Americans, the CFTC’s growing authority may be background noise, they are still benefiting from the markets that the agency helps enable. “The fact that you have a number of entities that have the ability to use these markets to be able to better allocate their risk means we’re allocating capital better, we’re being more efficient as a society, and we’re giving better opportunities for the economy as a whole,” Davis said. “Agencies like the CFTC and the SEC are really important because they create that environment in which capital, trading, and economic activity can continue to grow, which benefits everybody.”
