Commodity Futures Trading Commission (CFTC) Chair Michael Selig appeared before the House Agriculture Committee on Thursday, where lawmakers pressed him on insider trading concerns, the rise of prediction markets, and whether new financial products are being used in ways that blur the line between regulated trading and gambling-style activity.

The hearing also placed a spotlight on the Commodity Futures Trading Commission’s limited leadership structure and expanding mandate at a time of heightened political scrutiny.

Lawmakers Question Market Integrity and Enforcement Capacity

Members of Congress focused heavily on whether illicit trading activity has been occurring ahead of major policy announcements, including actions tied to tariffs, Venezuela, and Iran. According to lawmakers, some trading patterns appeared to precede significant government decisions, raising questions about whether confidential information was being used in markets under CFTC jurisdiction.

Selig sought to reassure lawmakers about enforcement priorities, stating, “I want to be crystal clear, to anyone who engages in fraud, manipulation or insider trading in ⁠any of our markets, we will find you and you will face the full force of the law,” while emphasizing that the agency enforces a strict stance on misconduct.

According to Reuters via Yahoo Finance, he also stressed the commission’s enforcement posture more generally, saying the CFTC applies a “zero-tolerance policy” toward insider trading and manipulation. When pressed for specifics on enforcement actions and investigations, Selig did not provide exact figures but indicated the agency regularly reviews and rejects contracts submitted under its self-certification process.

At one point, he said “we regularly reject contracts” when asked how many proposals had been turned down under his leadership. He also suggested that investigations tied to prediction markets could number in the “hundreds or thousands,” without offering a precise tally.

Prediction Markets, Sports Contracts, and Regulatory Boundaries

A central issue during the hearing involved prediction markets and whether they resemble traditional gambling products. Lawmakers pointed to event contracts linked to sports outcomes, political developments, and even conflict-related scenarios, arguing that such instruments can appear similar to state-regulated betting markets.

Rep. Gabe Vasquez highlighted this concern using a comparison between prediction market contracts and sportsbook odds on a baseball game. He challenged Selig to distinguish between them, to which the chair responded that he was not an expert in that specific comparison. Vasquez responded, “It’s clear to me that you can’t tell [the difference], because the average consumer also can’t tell,” arguing that the user experience and financial purpose appear nearly identical.

The debate also extended to whether Congress intended such markets to fall under CFTC oversight. Critics argued that sports-related event contracts resemble gambling more than financial risk management tools, while supporters of regulation within the agency emphasized statutory language defining commodities and swaps.

Selig referenced ongoing rulemaking efforts, noting that the agency has issued an advanced notice of proposed rulemaking to gather public input on prediction markets. Throughout the hearing, he repeatedly pointed back to that process when asked for direct policy judgments.

Political, Tribal, and Crypto-Linked Concerns

Concerns also emerged regarding the broader social and legal implications of prediction markets, particularly those involving sensitive topics such as war or political outcomes. Lawmakers raised issues about markets linked to conflict zones and questioned whether such products could enable profit from violent events.

Rep. Jim McGovern raised concerns about potential informational advantages in markets tied to political announcements, while Rep. Jim Costa described some prediction market activity as “gambling by just another name,” warning that it could conflict with voter-approved restrictions on sports betting in certain states.

Costa also raised tribal sovereignty concerns, arguing that these platforms may interfere with gaming compacts. “I don’t believe Congress intended sports wagering to be repackaged as a financial product to dodge rules that apply to everyone else, including our tribes,” he said.

Other lawmakers suggested technical safeguards such as geofencing to limit access to certain markets on tribal lands, though Selig again pointed to the ongoing rulemaking process rather than committing to specific policy solutions. He noted ongoing engagement with tribal stakeholders.

The hearing also touched on broader financial innovation, including decentralized derivatives platforms such as Hyperliquid. Lawmakers expressed concern that offshore perpetual futures trading could influence domestic markets. Rep. Austin Scott warned that “If the volume that I’m seeing is correct,” it could have implications for U.S. consumers and market stability.

Selig acknowledged plans to expand access to perpetual futures trading for retail participants, even as concerns persist about risk exposure and regulatory oversight in rapidly evolving digital asset markets.