Interviewer/Journalist (3:06)

Are there certain products or certain contracts that could be more susceptible to insider trading and manipulation?

CFTC Chair or Commissioner (3:11)

Well, certainly there's a range of different products out there, right. And certain products we just saw with Kalshi listing a product related to Mr. Beast and it brought an enforcement action against an employee of Mr. Beast who had information about when the videos would be posted and contents of the videos and was able to predict certain things and trade ahead of that. And insider trading is certainly a crime under our authority. That said, other products, right, you have controls and you ensure that there's not the ability to misappropriate insider information and trade on it. You block certain, for example, players from trading in their own contracts or people with information about an employer that they can trade ahead on. So it's important to enforce that in our markets. We have the same risks in our securities markets. And you know, you could have someone insider trading on a broker trading ahead of a customer, for example. So we do set rules and we enforce them. And some products of course are more susceptible than others. And maybe those shouldn't be listed by exchanges as they're evaluating what's susceptible to manipulation.

Interviewer/Journalist (4:12)

When you're in school and you're doing your training, did you ever think you'd be talking about Mr. Beast?

CFTC Chair or Commissioner (4:16)

I did not. That was not, you know, on the bingo card for sure.

Interviewer/Journalist (4:19)

Hey, what about sports? Because our analysts at Bloomberg Intelligence, they note that on these platforms like Kal she, like polymarket, about 90% of what happens there, 88% of US activity on prediction markets still sits squarely in sports markets. Why is betting on sports prediction market and not gambling?

CFTC Chair or Commissioner (4:36)

Well, we've got all sorts of different products out there. You start with insurance, you have securities, you got derivatives. And yes, there's gambling at the state level. They're all structured differently. These are different activities, different products. I can design an insurance contract that looks a lot like a derivatives contract, but there's different economic variables that are at play. And the way that it's structured is documented differently. All of that, when you go into a casino and you make a bet with a bookie, the house usually Wins. There's a different model, of course, where the bet is priced based on the House's own decisions and analytics. And of course, you get paid out. You win, you lose, you win too much, you often get kicked out. With derivatives, we have a very standardized system where you have a contract that allows here for a binary option where you are paid out based on an outcome. And you can get out of your position, you can sell it, you know, if the value of your contract goes up, you can liquidate, get out, recoup some of the costs, you can hold your position to the end, whatever you want to do. But we have certain rules around these products, and they're structured very differently from, for example, gambling. The underlying asset, I think, is what you're pointing to. Right? You've got a sports event at the as the underlying to the derivative, as opposed to, let's say, pork bellies as the underlying of the derivative. To us, we're agnostic. We have a very broad definition of commodity under our statute. And so we're not picking, okay, these sports products are gambling because they're, you know, the underlying sports. We treat them the same. The underlying fundamentals of the contract are the same. The, the asset at the underlying base is different. But that doesn't mean it's treated differently under our regulatory framework.

Interviewer/Journalist (6:13)

I think a lot of people out there right now might be thinking, it's kind of crazy that I can'. You know, use FanDuel or DraftKings and in every state in the US I have to be 21 to do that. But I can do the same thing to a certain extent on kalshi when I'm 18 and anywhere. How do you, how do you make sense of that for, like, a normal person?

CFTC Chair or Commissioner (6:32)

It really is no different than I can go and you have a state regulatory regime for insurance. I can go get an insurance contract in my home state. I can go. Otherwise, go to the federal system and get a derivatives contract that gives similar economic protection, risk management to myself as a company or as an individual. I really don't see any difference. There. There are different regulatory regimes for different products, and we have a federal system for derivatives. And so it does allow for those products to cross state lines and be accessed in places where maybe you couldn't access it otherwise. Just like with an insurance contract, they typically can't be offered across state lines. There's different regimes for insurance in each state, and we've got the same with gambling versus derivatives.

Interviewer/Journalist (7:15)

So I want to talk a little bit about sort of some recent events because there's this conversation happening about what should be constitute like a death market or not. In your speech yesterday, you said that regulating, your regulating philosophy is simple, like the practice of medicine. Our focus should be on finding and then administering the minimum effective dose. How do you apply that minimum effective dose to geopolitical risk bets that seem to quickly devolve into death markets or deathbeds?

CFTC Chair or Commissioner (7:46)

Well, self regulatory organizations like exchanges have the obligation to evaluate the contracts that they're listing to make sure that they meet our standards. One of those standards, as I mentioned earlier, is not being readily susceptible to manipulation. Another is our requirement that they have to be not on things like assassination or terrorism and so on and so forth, which are all restricted under our statute. And we as a regulator do have some authority to, when it's in the public interest, allow certain types of contracts. When you have a contract around a political event that isn't tethered or tied to, for example, an election, that does create a lot of risk that you could back into becoming an assassination market or a terrorism market or a war market. That's something the exchanges have to think about. That's not, you know, we're not in the business of going and rejecting contracts when we believe there's a potential risk if the exchanges are telling us they believe that these are consistent with our standards. But we of course exercise our enforcement authority where we think exchanges are violating the law. So it's an important question. It's one that the exchanges have to think about. We may have a role in providing guidance there, and that's something I think folks should stay tuned on. But of course, you know, it's very important to tether some of these political contracts to an actual political event. And that cabins the risk of something turning into an assassination market. If you look at, for example, the 2024 election contracts, there were assassination attempts on President Trump. There was a risk, for example, that could have turned into an assassination contract. I think this risk is underlying with a lot of contracts. That doesn't make them assassination contracts themselves, but if you have one that's very open ended and isn't tied to a specific election, that's really what they in theory could become. And that's something that we as a regulator are thinking about and I encourage the exchanges to think about as well.

Interviewer/Journalist (9:38)

People often lump Kalshi and polymarket together, but they are regulated differently. How is polymarket International not covered by US Regulatory oversight? It is an overseas platform, of course, but its executives are here in the US Its headquarters are in New York City. Americans can still access the platform with, with a VPN. Why is it not regulated by the

CFTC Chair or Commissioner (10:01)

U.S. well, the Biden administration actually drove Polymarket out of the US through enforcement, had an action against the company and as part of that enforcement action agreed with markets to keep the blockchain and kind of the underlying exchange offshore. Now we've seen them come into the US and have a registered exchange with us under, under the Trump administration. That said their offshore platform does not directly offer into the United States. You know, I can't speak to whether people are accessing it through a VPN or that sort of thing. As you point out, I'm not aware of this. But that platform itself is not available to the United States, whereas the regulated platform which we are the overseer of is, is a self regulatory organization and has to meet our standards.

Interviewer/Journalist (10:53)

But is there a chance that we're sitting here maybe a year from now and polymarket is regulated by the cftc?

CFTC Chair or Commissioner (10:58)

Well, the Polymarket US Platform is regulated by the CFTC today.

Interviewer/Journalist (11:02)

But what about polymarket International?

CFTC Chair or Commissioner (11:04)

Well, I'd love to see blockchain based exchanges here in the United States. I think the potential of on chain markets is huge. And if you combine the decentralized truth aspects of a blockchain and prediction markets, I think that's going to be a really exciting thing to have here in the United States.

Interviewer/Journalist (11:19)

Well, speaking of the blockchain, what can you do further when it comes to digital assets if, if Congress just cannot get through the Clarity Act?

CFTC Chair or Commissioner (11:27)

Well, the CFTC has got a lot of authority. We're certainly going to continue to make sure that we're prepared for on chain markets and we're modernizing and upgrading our rules and regulations so that the exchange that wants to put their markets on a blockchain can do so here in the United States States. It's really unacceptable to be pushing all this stuff offshore simply because it's different type of technology. The Clarity act is really, I think a powerful piece of legislation because it'll help future proof our crypto markets by ensuring that things are in statute. And the Supreme Court said very loud and clear that if things aren't explicit in statute, there's a risk that the agency doesn't have the same sort of deference on some of the authority of the agency. That said, we have very broad authority over our derivatives markets course over anti fraud and anti manipulation in the spot markets. And then to the extent an exchange is offering margin trading, that's also within our authority. So there's a lot we can do with or without legislation.

Interviewer/Journalist (12:21)

I think a lot of people are thinking about just person power at the cftc and I'm wondering, enforcement staff. The Chicago office doesn't have any enforcement staff. I know they resigned before you were even chair. What's the status of hiring people there or other commissioners to be appointed?

CFTC Chair or Commissioner (12:38)

Well, I just brought on a new enforcement director and he is quickly staffing up and building out that capability. And it's very important to have, you know, folks in each office and throughout the building. But of course we're not operating kind of like a Starbucks model where you have, you know, an office on every block with with people in it. We've got a critical mass in D.C. and that's where a lot of our enforcement attorneys are housed. We've got a number of attorneys in New York of course as well and in Kansas City. So we'll continue to build out personnel in each office. But we're also in a world where AI and automation are allowing us to do so much more with with less individuals. So I'm not concerned about being able to fulfill our obligations, but I'm always excited to bring on people that are willing to help support the mission.

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