Reauthorizing the CFTC: Stakeholder Perspectives (U.S. House Committee on Agriculture, Subcommittee on Commodity Markets, Digital Assets, and Rural Development)

Hearing	Reauthorizing the CFTC: Stakeholder Perspectives
Committee	U.S. House Committee on Agriculture, Subcommittee on Commodity Markets, Digital Assets, and Rural Development
Date	July 25, 2024

 

Hearing Takeaways:

• Reauthorization of the U.S. Commodity Futures Trading Commission (CFTC): Subcommittee Members and the hearing’s witnesses expressed interest in working to reauthorize the CFTC. They noted how Congress had last reauthorized the CFTC in 2008 and stated that CFTC reauthorization is needed given subsequent developments in the derivatives markets. They elaborated that these developments include growth in trading volume, new market conditions, and new products (including digital asset-related products). They discussed how derivatives (including futures and swaps) provide essential tools for risk management, price discovery, and efficient capital allocation and noted how farmers, ranchers, manufacturers, and other end-users that rely upon these products. They further remarked that the CFTC’s reauthorization would reinforce the U.S.’s global leadership in financial regulation and would indicate that the U.S.’s commitment to maintaining high standards in its markets, protecting investors, and fostering innovation.
  • The CFTC’s Principles-Based Approach to Regulation: Full Committee Chairman Glenn “GT” Thompson (R-PA), Mr. Sexton, and Mr. Lukken expressed support for the CFTC’s principles-based approach to regulation and stated that this approach has made the Commission resilient and adaptable to evolving trends and technological advancements. They commented that this principles-based approach enables Congress to be less prescriptive in the direction that it provides to the Commission as part of reauthorization.
• CFTC Policy Issues: Subcommittee Members and the hearing’s witnesses used the hearing to discuss many current policy issues related to the CFTC. They expressed interest in using the CFTC reauthorization process to address (or not address) many of these policy issues.
  • Enforcement Activities: Subcommittee Members, Mr. Lukken, and Mr. Antonsen expressed interest in addressing the CFTC’s enforcement activities as part of its reauthorization process. Subcommittee Members and Mr. Lukken also expressed interest in ensuring that the CFTC maintains robust authorities and capabilities to pursue bad behavior overseas when there exists a strong nexus to the U.S. Mr. Lukken stated that CFTC cooperation with foreign regulators is central to these efforts and that information and personnel sharing would support these efforts. Subcommittee Ranking Member Yadira Caraveo (D-CO) further expressed interest in policies to harmonize enforcement authorities between the CFTC and the U.S. Securities and Exchange Commission (SEC).
  • Concerns Over Vertical Integration within the Commodities and Derivatives Markets: Mr. Lukken, Mr. Antonsen, and Ms. Thornton raised concerns over current industry trends (particularly within the digital assets industry) that are bringing exchanges, clearinghouses, future commission merchants (FCMs), clearing brokers, and trading firms under a single legal entity. They expressed concerns that this vertical integration could lead to conflicts of interest and governance challenges. Mr. Lukken expressed the support of his organization, the Futures Industry Association (FIA), for CFTC Chairman Rostin Behnam’s comments that the CFTC plans to propose a new rule to address these potential conflicts of interest.
  • Bank Capital Proposals (Including the Basel III Endgame Proposal): Subcommittee Republicans, Mr. Lukken and Mr. Antonsen raised concerns over recent bank capital proposals, including the Basel III Endgame proposal. They noted how these proposals would significantly increase the amount of capital held by U.S. banks for client clearing. They stated that these proposals would likely increase the cost of hedging for all end-users (including production agriculture end-users) and cause further concentrations of FCMs. They expressed hope that these proposals would be reconsidered and reworked. Of note, Mr. Sexton recommended that the CFTC hold a roundtable with the bank regulators to further determine the impacts of the Basel III Endgame proposal’s capital rules.
  • The SEC’s U.S. Treasury Clearing Mandate: Mr. Lukken mentioned the SEC’s U.S. Treasury clearing mandate will be taking effect over the next two years. He noted how the cleared derivatives markets are “heavy” users of U.S. Treasuries and repurchase agreement (repo) markets in the funding, margining, and collateralization of futures trades. He stated that Congress should ensure that there are no impediments to customers accessing these markets or overlapping jurisdictional issues between the CFTC and the SEC regarding these mandates.
  • FCM Bankruptcy Protections: Mr. Lukken and Mr. Sexton called on Congress to pass a legislative fix to resolve legal uncertainty around FCM bankruptcies regarding the definition of customer property. Mr. Sexton recounted how the CFTC had adopted rules dictating that if there exists a shortfall in customer segregated funds, then the term “customer funds” would include all assets of the FCM until customers had been made whole. He noted however that a U.S. District Court decision from several years ago had cast doubt on the validity of the CFTC’s authority to adopt its rule on FCM bankruptcies. He indicated that while this decision was subsequently vacated, he commented that a “cloud of uncertainty” continues to remain over this rule’s efficacy. He remarked that Congress should address this current uncertainty through ensuring that FCM customers have priority in the bankruptcy process if there occurs a shortfall in an FCM’s segregated funds.
  • CFTC Oversight of Voluntary Carbon Credit Markets: Ms. Thornton remarked that the CFTC should not be authorized to take a larger role regarding voluntary carbon credit derivatives. She asserted that the underlying assets (i.e., the voluntary carbon credits) cannot be readily traded in a manner that is consistent with the CFTC’s core principles. She stated that the CFTC cannot verify the carbon savings claims underlying these derivatives. She asserted that these credits should not be listed or traded until other responsible public and private parties can fix these problems in a unified global system.
  • Mr. Lukken’s Additional Policy Recommendations: Mr. Lukken recommended that Congress expand the CFTC’s ability to educate farmers about derivatives markets (including the risks and opportunities associated with derivatives) and grant the CFTC with flexibility to partner with the private sector on research and development (R&D) efforts.
• CFTC Funding: Subcommittee Democrats, Mr. Lukken, Mr. Antonsen, and Ms. Thornton expressed concerns that the CFTC currently does not receive sufficient funding. They stated that this lack of funding undermines the CFTC’s ability to adequately police derivatives markets and to address new products (such as digital assets) and growing markets. They specifically raised concerns over how the U.S. House of Representatives’s current funding proposal for the CFTC would cut funding for the Commission by $20 million.
  • Use of User Fees to Fund the CFTC: Mr. Lukken and Mr. Antonsen raised concerns over proposals to impose user fees on the agriculture industry as a means for funding the CFTC. They warned that these fees would discourage hedging activities. Mr. Antsonsen also cautioned Congress against setting up a situation where the CFTC’s budget would be dependent on the volume of the trading in the products that it is tasked with regulating.
  • CFTC’s Whistleblower Protection Program: Rep. Zach Nunn (R-IA) expressed support for the CFTC’s Whistleblower Program as a tool for uncovering illegal activities within the derivatives markets and funding the CFTC through the collection of fines. He warned that Congressional inaction could cause the Whistleblower Program to soon become defunct due to a lack of funds. He mentioned how he had introduced the bipartisan and bicameral CFTC Whistleblower Fund Improvement Act to permanently address the Whistleblower Program’s funding challenges. Ms. Thornton remarked that while the CFTC’s Whistleblower Program is important, she stated that Congress should consider whether the Program constitutes a sustainable long-term approach for funding and supporting the CFTC’s enforcement activities.
• Potential Role for the CFTC in Overseeing and Regulating Digital Assets: Subcommittee Members and the hearing’s witnesses expressed interest in current legislative proposals to provide the CFTC with oversight and regulatory authority over spot digital asset commodity markets. They highlighted how the U.S. House of Representatives had recently passed the Financial Innovation and Technology for the 21st Century (FIT21) Act to establish a comprehensive federal regulatory framework for the spot digital assets market. They noted how this legislation would establish clear responsibilities for the CFTC and SEC in overseeing and regulating this market. Ms. Thornton argued however the CFTC should not oversee and regulate digital assets. She stated that the CFTC lacks experience protecting retail investors, these efforts would divert resources away from the CFTC’s existing responsibilities, and that the CFTC’s involvement in this space would create regulatory confusion. She also warned that a new CFTC regulatory regime could incentivize parties within the securities markets to restructure assets and deals to take advantage of a weaker CFTC regulatory regime, which could imperil consumers. She asserted that the SEC is better positioned to oversee the digital assets space.
  • Role of the National Futures Association (NFA) in Overseeing and Regulating Digital Assets: Mr. Sexton testified that the member firms of his self-regulatory organization (SRO), NFA, have engaged in spot digital asset commodity activities for over five years and that NFA has taken actions to regulate these activities. He asserted that NFA is “fully capable” of working with the CFTC to perform the responsibilities of a registered futures association (RFA) as outlined in the FIT21 Act. He also stated that NFA would need to develop a new revenue source from its new members to cover its new oversight and regulatory responsibilities as part of any new regulatory regime for digital assets.
  • Digital Asset Price Variations: Ms. Thornton discussed how digital asset token prices may vary across different platforms because these platforms rely upon different data streams. She warned that unscrupulous actors can take advantage of digital asset market participants through focusing on arbitrage opportunities across digital asset platforms. She noted how the SEC addresses these issues within the traditional securities markets through requiring a national market system. She explained that different securities platforms are required to submit data so that a broker would know the prices being offered for a given security across different exchanges. She also noted how brokers have a fiduciary duty of best execution, which means that brokers must pick the best price for customers among the various exchanges.

Hearing Witnesses:

1. Mr. Walter Lukken, President and Chief Executive Officer, Futures Industry Association
2. Mr. Thomas Sexton, President and Chief Executive Officer, National Futures Association
3. Mr. Travis Antonsen, Senior Vice President, Grain Marketing and Logistics, Agtegra Cooperative 
4. Ms. Alexandra Thornton, Senior Director, Financial Regulation, Center for American Progress

Member Opening Statements: 

Subcommittee Chairman Dusty Johnson (R-SD):

• He described derivatives markets as the “backbone” of the global financial system and noted how these markets provide essential tools for risk management, price discovery, and efficient capital allocation.
  • He indicated that these markets enable businesses and investors to hedge against price volatility and foster stability and predictability across various sectors.
• He noted how derivatives are important in a variety of sectors, including the energy, finance, and agriculture sectors.
  • He highlighted how farmers use derivatives to lock in prices for their crops, which protects them from unpredictable weather and market fluctuations.
  • He also highlighted how companies use derivatives to stabilize energy prices for oil, gas, and electricity.
  • He further highlighted how derivatives help manage interest rate risk, currency fluctuations, and credit exposure and commented that this use of derivatives contributes to the overall stability of global financial markets.
• He discussed how the U.S. futures and swaps markets are the largest and most liquid markets in the world and largely attributed the success of these markets to the CFTC’s regulation.
• He stated that the CFTC works to ensure the integrity, vibrancy, and resiliency of derivatives markets.
  • He commented that these efforts protect farmers, ranchers, manufacturers, and other end-users that rely upon derivatives markets for robust risk management tools.
• He indicated that the hearing would involve testimony from a diverse set of stakeholders regarding the importance of reauthorizing the CFTC and expressed interest in receiving recommendations for this reauthorization.
• He recounted how CFTC Chairman Rostin Behnam had emphasized the importance of reauthorizing the CFTC in testimony before the Full Committee in March 2024.
  • He noted how CFTC Chairman Behnam had argued that this reauthorization is key to assuring the public and the U.S.’s international partners that Congress takes derivatives markets and the U.S.’s supremacy in derivatives markets very seriously.
• He expressed agreement with CFTC Chairman Behnam’s statements on reauthorizing the CFTC and remarked that the Committee must examine the CFTC’s work and the needs of derivatives market users.
  • He commented that the reauthorization process is key for enabling the Committee to achieve these objectives.
• He expressed his intention to have Congress advance a bipartisan reauthorization of the CFTC.

Subcommittee Ranking Member Yadira Caraveo (D-CO):

• She discussed how the CFTC protects the integrity of the U.S.’s futures markets and the important price discovery and risk management functions that these markets serve.
  • She also mentioned how Congress had empowered the CFTC to oversee the swaps market and make this market more transparent and financially secure.
• She stated that U.S. derivatives markets have proven to be “remarkably resilient” to global volatility.
  • She highlighted how these markets have weathered international conflicts, extreme weather events, and the COVID-19 pandemic.
• She noted however that the CFTC has not been reauthorized for more than two decades and expressed interest in using the hearing to identify policies that Congress should consider as part of the CFTC’s reauthorization.
• She expressed particular interest in working to maintain strong customer protections within the U.S.’s financial markets, especially for retail investors.
  • She asserted that strong customer protections are necessary for enabling the U.S.’s financial markets to remain vibrant, innovative, amongst the strongest in the world.
• She also remarked that Congress must ensure that it is not shortchanging the CFTC in its appropriations process, especially given current efforts to expand the Commission’s oversight responsibilities to the digital assets marketplace.
  • She noted how the U.S. House of Representatives’s current funding proposal for the CFTC would cut funding for the Commission by $20 million.
  • She asserted that this proposed funding cut would harm the CFTC’s ability to police its derivatives markets.

Full Committee Chairman Glenn “GT” Thompson (R-PA):

• He called the U.S.’s derivatives markets “essential” to the U.S. economy and noted how these markets enable businesses of all sizes to manage the risks associated with input and output price fluctuations.
  • He stated that derivatives enable businesses to focus on their core activities without being “unduly concerned” with ever changing commodity prices.
• He remarked that the CFTC serves a “critical” function in regulating derivatives markets both domestically and internationally.
  • He noted how the CFTC safeguards market participants from fraud, manipulation, and abusive practices while also promoting financial innovation and fair competition.
• He mentioned how a bipartisan group of Committee Members (which included himself) had recently had a “terrific” meeting with CFTC Chairman Rostin Behnam, CFTC Commissioners, and CFTC staff at the CFTC’s headquarters.
  • He indicated that the intent of this meeting was for the Committee to gain a deeper understanding of how the CFTC operates and the pressing issues facing the Commission.
• He noted how the CFTC’s authorization had expired more than a decade ago and called it crucial for Congress to swiftly reauthorize the Commission.
  • He commented that the reauthorization process is not a bureaucratic formality and is instead a reaffirmation of Congress’s commitment to robust regulatory oversight of the derivatives market.
• He stated that the CFTC’s reauthorization would ensure that the Commission has the necessary tools and resources to adapt to the evolving financial landscape.
  • He commented that technological advancements, such as artificial intelligence (AI), and the rise of new financial products, such as digital assets, demonstrate that the CFTC’s role is more critical than ever.
• He remarked that the CFTC’s reauthorization would reinforce the U.S.’s global leadership in financial regulation and would indicate that the U.S.’s commitment to maintaining high standards in its markets, protecting investors, and fostering innovation.
• He mentioned how both he and Full Committee Ranking Member David Scott (D-GA) have called for the current Congress to reauthorize the CFTC.

Witness Opening Statements:

Mr. Walter Lukken (Futures Industry Association):

• He discussed how his organization, FIA, represents futures, options, and centrally cleared derivatives markets globally and expressed FIA’s support for reauthorizing the CFTC.
  • He asserted that this reauthorization would serve as an “exercise in good government” and provide a “Congressional stamp of approval” of the CFTC’s mission.
• He highlighted how total trading volume on CFTC-regulated exchanges in the U.S. has doubled since 2008 (which was the last time that the Committee had reauthorized the CFTC).
• He also noted how post-2008 Financial Crisis reforms have brought more products under the CFTC’s regulation.
  • He commented that these reforms have made the derivatives markets and the financial system safer.
• He remarked that U.S. markets have demonstrated “tremendous” resilience and strength in the face of recent volatility.
  • He noted how U.S. markets have remained stable and working throughout recent stress events, including the COVID-19 pandemic, the war in Ukraine, the Silicon Valley Bank failure, and inflation.
• He largely attributed the resilience of U.S. markets to the CFTC’s principles-based regulatory regime and stated that this regulatory regime has enabled the CFTC to keep pace with evolving trends and technological advancements through flexible oversight tools.
  • He commented that this adaptability has reduced the need for wholesale changes to the CFTC’s statutory authority.
• He remarked that while the CFTC has flexibility that has proven effective, he asserted that the Committee must still provide oversight of the Commission.
• He then discussed how the American public is becoming more accepting of new financial products (such as cryptocurrencies) and noted how digital asset platforms are bringing novel market structures into the traditional futures industry.
  • He indicated that exchanges, clearinghouses, clearing brokers, and trading firms are increasingly falling under a single legal entity.
• He expressed FIA’s concerns that collapsing the existing multi-tiered ecosystem (with its independent checks and balances) could undo valuable customer protections of the listed derivatives markets.
  • He expressed FIA’s support for CFTC Chairman Rostin Behnam’s indication that the CFTC would propose a new rule to address these potential conflicts.
• He also discussed how pending U.S. bank capital proposals would “dramatically” increase the amount of capital held by U.S. banks for client clearing.
  • He predicted that these U.S. bank capital proposals would increase the cost of hedging for all end-users (including production agriculture end-users).
• He expressed appreciation to the Committee for voicing concerns about the impact of these U.S. bank capital proposals.
• He further mentioned the SEC’s U.S. Treasury clearing mandate will be taking effect over the next two years.
  • He noted how the cleared derivatives markets are “heavy” users of U.S. Treasuries and repo markets in the funding, margining, and collateralization of futures trades.
  • He stated that the Committee will play a “critical role” in ensuring that customers can easily access these markets and that there are no overlapping jurisdictional issues between the CFTC and the SEC with these mandates.
• He then remarked that the CFTC’s existing regulatory framework has served as a source of strength for U.S. derivatives markets and commented that the Committee should pursue a “simple and straightforward” reauthorization of the CFTC.
• He stated however that the Committee should make three “minor” adjustments to the CFTC as part of the authorization process.
  • He first recommended that the Committee pass a legislative fix to resolve legal uncertainty around FCM bankruptcies regarding the definition of customer property.
  • He secondly recommended that the Committee expand the CFTC’s ability to educate farmers about derivatives markets (including the risks and opportunities associated with derivatives).
  • He lastly recommended that the Committee grant the CFTC with flexibility to partner with the private sector on R&D efforts.

Mr. Thomas Sexton (National Futures Association):

• He discussed how his organization, the NFA, is a RFA under the Commodity Exchange Act (CEA) and serves as the derivatives industry’s independent SRO.
  • He stated that NFA’s main objective is to partner with the CFTC on regulating the derivatives markets and indicated that the CFTC oversees each and every aspect of NFA’s regulatory authority.
• He remarked that NFA’s previous coordination efforts with the CFTC have built a strong track record of protecting retail customers and prosecuting retail trading abuses and frauds.
  • He thanked CFTC Chairman Rostin Behnam and the CFTC’s other Commissioners for their support of NFA and their willingness to work with NFA to resolve the industry’s regulatory issues.
• He then discussed the importance of CFTC reauthorization for NFA and asserted that customer protection issues should be “front and center” of the reauthorization process.
• He specifically called for Congress to strengthen FCM customer protections in bankruptcy as part of any CFTC reauthorization effort.
  • He mentioned how the Committee had passed a 2019 CFTC reauthorization bill that included a customer protection provision related to FCM bankruptcies and expressed NFA’s support for this provision.
• He recounted how the CFTC had adopted rules regarding FCM bankruptcies over 40 years ago.
  • He highlighted how these rules (among other things) provided that if there exists a shortfall in customer segregated funds, then the term “customer funds” would include all assets of the FCM until customers had been made whole.
• He noted however that a U.S. District Court decision from several years ago had cast doubt on the validity of the CFTC’s authority to adopt its rule on FCM bankruptcies.
  • He indicated that while this decision was subsequently vacated, he commented that a “cloud of uncertainty” continues to remain over this rule’s efficacy.
• He remarked that Congress should address this current uncertainty through ensuring that FCM customers have priority in the bankruptcy process if there occurs a shortfall in an FCM’s segregated funds.
  • He commented that Congress could accomplish this objective through amending Sec. 20 of the CEA to make clear that the CFTC has the authority to adopt its previous rule.
  • He also commented that there exists broad industry support for this proposed policy change.
• He then discussed how Congress and the CFTC had tasked NFA with regulating firms engaging in exchange-traded derivatives.
  • He mentioned how Congress and the CFTC have subsequently tasked NFA with regulating retail foreign exchange (forex) markets and swaps markets.
• He noted how the CFTC has led efforts to protect customers through addressing fraudulent schemes involving retail digital asset commodities activities.
• He applauded the Committee for its collaborative work with the U.S. House Committee on Financial Services to pass the FIT21 Act.
  • He noted how this legislation would govern spot digital assets (including digital assets that are commodities).
• He highlighted how the FIT21 Act includes a significant role for an RFA in regulating the digital asset commodity market.
• He expressed NFA’s willingness to assist the CFTC in developing an appropriate regulatory framework for the digital asset commodity market if Congress moves forward with digital assets market structure legislation.
  • He testified that NFA’s member firms have engaged in spot digital asset commodity activities for over five years and that NFA has taken actions to ensure that these member firms maintain appropriate customer protections.
  • He asserted that NFA is “fully capable” of working with the CFTC to perform the responsibilities of an RFA as outlined in the FIT21 Act.

Mr. Travis Antonsen (Agtegra Cooperative):

• He mentioned how his agriculture cooperative, Agtegra Cooperative, is owned by 6,700 farmers across North Dakota and South Dakota.
  • He also indicated that he is actively engaged in his own family’s farming operation.
• He discussed how some agriculture markets are currently experiencing lower price levels driven by increased international crop production.
  • He commented that “mostly favorable weather” in 2024 is aiding in crop development and indicated that futures contracts are currently pricing in expectations for another large harvest.
  • He indicated that producers with forward price contracts will likely receive higher prices for their crops.
• He testified that his agriculture cooperative is active in offering pricing tools that allow for members to manage their price risks well in advance of harvesting or planting crops.
• He stated that his agriculture cooperative relies upon “highly functioning” derivatives markets to manage large commodity price risks and movements.
  • He mentioned how his agriculture cooperative uses exchange-traded futures and options, over-the-counter (OTC) derivatives, and OTC contracts to hedge its price risks in order to protect their grain and storage, manage their future sales, and offset energy and fertilizer risks.
  • He also mentioned how his cooperative uses these derivatives to offer forward contracting options to its member owners.
• He discussed how the CFTC ensures the integrity of derivatives markets and expressed his agriculture cooperative’s support for the Committee’s efforts to reauthorize the CFTC.
  • He commented that reauthorizing the CFTC is how the Committee acknowledges the importance of the Commission’s critical functions.
• He noted how the CFTC’s funding has remained flat (despite the Commission’s expanded responsibilities) and called on Congress to provide sufficient funding for the Commission’s important functions.
  • He acknowledged however that the Committee lacks jurisdiction over the CFTC’s funding.
• He then cautioned against the imposition of any user fees on the agriculture industry as a means of funding the CFTC.
  • He noted how agriculture is a high volume and low margin industry and warned that incremental costs imposed upon industry participants will eventually flow to end-users and farmers.
• He discussed how the grain represented by underlying futures contracts can be traded multiple times and stated that the imposition of a user fee would cause producers to receive less money for their products.
  • He warned that further increasing costs would have the unintended consequences of discouraging prudent hedging practices.
• He also cautioned Congress against setting up a situation where the CFTC’s budget would be dependent on the trading volume in the products that it is tasked with regulating.
• He further mentioned how his written testimony details his agriculture cooperative’s concerns regarding the Basel III Endgame proposal.
  • He expressed appreciation for Congress’s engagement on this issue and expressed hope that the proposal’s capital requirements would be reworked.

Ms. Alexandra Thornton (Center for American Progress):

• She discussed how the CFTC plays a “central” role in overseeing commodities and xfswaps markets.
  • She noted how the Commission oversees dozens of entities where derivatives are traded, ten organizations that clear those trades, and five additional organizations located abroad.
  • She also noted how the Commission oversees the registration and compliance of thousands of derivatives market participants and SROs, including the Chicago Mercantile Exchange and NFA.
• She asserted however that the CFTC is “critically” underfunded and would remain underfunded even if Congress were to grant the Commission all of its requested funding.
  • She argued that the Commission lacks adequate resources to fulfill its existing mission and statutory obligations.
• She stated that the CFTC’s underfunding results in the Commission not performing many important protections and functions.
  • She indicated that these protections and functions not being performed include comprehensive reviews of designated contract market (DCM) rule changes and products and the development and enforcement of detailed advertising, performance, and fee rules.
• She also commented that the markets overseen by the CFTC have become larger, faster, and more interconnected since the 2008 Financial Crisis.
• She remarked that the CFTC’s responsibilities are essential to maintaining the integrity, resilience, and vibrancy of derivatives markets and ensuring that these markets never again threaten the financial system’s stability or the U.S. economy.
  • She asserted that the CFTC should be reauthorized and adequately funded to carry out its existing responsibilities.
• She contended that the CFTC’s authorized activities should not be expanded to cover digital assets and voluntary carbon credits.
  • She asserted that protecting retail investors and consumers from fraud and abuse within the cryptocurrency industry should be the “guiding principle” of any new special digital asset regulatory regime.
• She stated however that the CFTC and its SRO currently lack comprehensive marketing and sales practice rules like those of the Financial Industry Regulatory Authority (FINRA) and the SEC.
  • She noted how the CFTC has seldom had to protect retail investors from the information asymmetries associated with financial transactions.
• She also noted how market intermediaries often promote digital assets and stated that these market intermediaries can act in multiple conflicting roles.
  • She commented that most rules designed to reduce such conflicts of interest, along with Combating the Financing of Terrorism (CFT) and anti-money laundering (AML) rules, require transparency and accountability that the industry does not want.
  • She asserted however that these rules are essential for customer protection.
• She remarked that the CFTC would need to develop an extensive regulatory framework to adequately protect retail investors within the cryptocurrency market.
  • She cautioned that this framework would take years to develop and divert significant time and energy away from the Commission’s existing duties.
  • She also cautioned that the ensuing rules could raise regulatory risks if challenged in court.
• She contended that a new CFTC regulatory regime for digital assets could therefore foster more uncertainty around digital assets.
• She also asserted that a new CFTC regulatory regime for digital assets would be inefficient and costly to taxpayers and market participants.
  • She elaborated that this proposed CFTC regulatory regime would be duplicative of the SEC’s robust investor protection regime and commented that the SEC’s regulatory regime has been perfected continuously over nine decades.
• She further stated that a new CFTC regulatory regime could incentivize parties within the securities markets to restructure assets and deals to take advantage of a weaker CFTC regulatory regime.
  • She warned that this restructuring could spread risks to retail securities investors.
• She lastly remarked a that a new CFTC regulatory regime for digital assets could create a “veneer” of legitimacy and safety, which would further confuse retail investors.
  • She commented that any perceived gaps in the current federal regulatory framework for digital transactions could lead to larger gaps and greater risks to U.S. capital markets.
• She then stated that the CFTC should not be authorized to take a larger role regarding voluntary carbon credit derivatives because the underlying assets (i.e., the voluntary carbon credits) cannot be readily traded in a manner that is consistent with the CFTC’s core principles.
  • She commented that a material percentage of the projects underlying carbon credits simply do not generate the carbon savings claimed by those that market them.
  • She elaborated that the amount of carbon that is actually being removed and the length of time that this carbon is being removed is not sufficiently known to form a reliable market.
  • She further asserted that this topic is “far beyond” the Commission’s expertise to fix.
• She remarked that voluntary carbon credit derivatives should not be listed or traded until responsible public and private parties can fix the aforementioned problems in a unified global system.

Congressional Question Period:

Rep. Frank Lucas (R-OK):

• Rep. Lucas discussed how the CFTC regulates markets that impact nearly every aspect of the economy. He remarked that reauthorizing the CFTC would enable Congress to provide meaningful oversight of the Commission and certainty for market participants. He stated that the derivatives market faces several potential stresses, including the Basel III Endgame proposal, the Global Systemically Important Bank (GSIB) surcharge, U.S. Treasury market structure reforms, and SEC rules. He remarked that Congress should consider the full regulatory environment facing derivatives markets during its CFTC reauthorization process. He mentioned how he has discussed the Basel III Endgame proposal’s impact on capital markets with CFTC Chairman Rostin Behnam, U.S. Secretary of the Treasury Janet Yellen, U.S. Federal Reserve Chairman Jerome Powell, and all of the prudential regulators. He predicted that this proposal would result in reduced access to derivative products for end-users and further concentrations of FCMs. He stated that regulators have indicated their openness to a re-proposal of Basel II Endgame. He noted however that the U.S. Federal Insurance Deposit Corporation (FDIC) and the U.S. Office of the Comptroller of the Currency (OCC) would need to join with the U.S. Federal Reserve on deciding to repropose Basel III Endgame. He asked Mr. Lukken to expand on why it is important for regulators to reopen the Basel III Endgame proposal for public comment.
  • Mr. Lukken thanked Rep. Lucas and the Committee for highlighting how derivatives markets and clearing and central counterparties (CCPs) reduce risks in the financial system. He noted how bank capital holding requirements were an important component of the financial reforms stemming from the 2008 Financial Crisis. He explained that these reforms required banks to hold more capital for riskier activities. He criticized these reforms and asserted that prudential regulators are overtaxing clearing activity. He warned that the Basel III Endgame proposal would reduce access to hedging vehicles for end-users, which will impede the ability of end-users to manage commodity market volatility. He expressed hope that prudential regulators would set bank holding requirements that are proportional to the risks brought to markets.
• Rep. Lucas then noted how Mr. Sexton serves as a member of the CFTC’s Global Markets Advisory Committee (GMAC). He mentioned how the GMAC had recently suggested that the CFTC hold a roundtable with the bank regulators focused on derivatives issues impacted by the Basel III Endgame proposal. He asked Mr. Sexton to discuss the importance of stakeholder feedback on matters that will have a significant impact on the market.
  • Mr. Sexton expressed support for the GMAC’s recommendation for the CFTC to hold a roundtable with the bank regulators to consider the impacts of the Basel III Endgame proposal’s capital rules. He called these capital rules “extremely important” to farmers, ranchers, end-users, and hedgers and warned that the adoption of these capital rules could result in consolidation amongst firms. He stated that stakeholder impact comments are “extremely important” for assessing the Basel III Endgame proposal’s capital rules.
• Rep. Lucas then discussed how reauthorizing the CFTC provides Congress with the opportunity to closely examine the CFTC’s enforcement activities and identify potential improvements to the CFTC’s enforcement regime. He asked Mr. Lukken to indicate whether the CFTC’s current cross-border authority is effective from a regulatory and enforcement perspective.
  • Mr. Lukken remarked that the CFTC had been able to work closely with foreign regulatory authorities during his tenure at the Commission. He stated that the CFTC currently possesses appropriate authority to pursue bad behavior overseas when there exists a strong nexus to the U.S.
• Rep. Lucas reiterated his concerns over the potential impacts of the Basel III Endgame proposal’s capital requirements on the U.S. economy.

Subcommittee Chairman Dusty Johnson (R-SD):

• Chairman Johnson expressed agreement with Rep. Frank Lucas’s (R-OK) concerns regarding the Basel III Endgame proposal’s capital requirements.

Subcommittee Ranking Member Yadira Caraveo (D-CO):

• Ranking Member Caraveo mentioned how the Committee’s last CFTC reauthorization attempt had included provisions to harmonize some enforcement authorities between the CFTC and the SEC. She noted how one of these provisions would have clarified the CFTC’s authority to prosecute fraud and manipulation outside of the U.S. where such activities impair domestic futures markets. She noted how another of these provisions would have established a reckless standard for those that aid and abet fraud perpetrators and market manipulators. She indicated that a reckless standard already applies to those that perpetrate fraud and manipulation. She asked the witnesses to opine on whether the U.S. needs to harmonize activities between CFTC and the SEC.
  • Note: Mr. Sexton’s response to the question was inaudible.
  • Mr. Lukken called it important for the CFTC to possess clear authority to pursue bad behavior occurring overseas. He stated that he could not speak to whether harmonizing the enforcement authorities of the CFTC and the SEC constitutes the correct approach. He remarked that the CFTC had possessed ample enforcement authority when he had previously served as CFTC Chairman. He stated that the CFTC had not experienced any impediments when pursuing bad behavior occurring overseas. He expressed support for the premise that the CFTC should have a “robust” authority to pursue manipulative behavior overseas.
  • Mr. Antonsen expressed agreement with the previous responses.
  • Ms. Thornton stated that she does not have a strong opinion on whether the U.S. needs to harmonize activities between CFTC and the SEC. She expressed interest in learning more about the issue.
• Ranking Member Caraveo then noted how Mr. Lukken’s testimony had raised concerns regarding conflicts of interest within vertically integrated structures. She elaborated that Mr. Lukken had indicated that these vertically integrated structures could involve FCMs that are owned by exchanges and clearinghouses and that are embedded within the trading and legal structures of these organizations. She asked Mr. Lukken to further discuss these concerns and the impact of such structures on the U.S. financial system. She also asked Mr. Antonsen to indicate whether his agriculture cooperative’s members have concerns regarding these structures.
  • Mr. Lukken discussed how many cryptocurrency platforms are combining exchanges, clearinghouses, and FCMs into a single legal entity. He called this trend problematic given how exchanges and clearinghouses possess self-regulatory authorities over FCMs. He commented that the combinations of these various entities into a single entity results in these entities policing themselves. He mentioned how FIA had raised concerns over FTX’s application to combine an exchange, a clearinghouse, and a trading arm and commented that this combination of various entities had contributed to FTX’s ultimate demise. He remarked that the CFTC should review whether this vertical integration could lead to conflicts of interest and governance challenges. He also stated that the CFTC should consider whether certain functions must be separated to address self-regulatory concerns.
  • Mr. Antonsen expressed support for providing guardrails between FCMs, exchanges, and clearinghouses. He mentioned how his agriculture cooperative uses multiple FCMs and called it important for there to exist FCM options that are not connected to exchanges.

Full Committee Chairman Glenn “GT” Thompson (R-PA):

• Chairman Thompson noted how Mr. Lukken had served as the CFTC’s Acting Chairman during the Commission’s last reauthorization in 2008. He also noted how Mr. Lukken’s testimony had discussed the increasingly global nature of derivatives markets. He asked Mr. Lukken to elaborate on how the derivatives markets have evolved since 2008. He also asked Mr. Lukken to address the importance of reauthorizing the CFTC as derivatives markets evolve.
  • Mr. Lukken remarked that derivatives markets have become more global and larger since his tenure at the CFTC. He commented however that the CFTC’s regulatory framework has been able to keep pace with these developments. He stated that the Commodity Futures Modernization Act of 2000 (CFMA) has provided the CFTC with strong flexibilities to respond to market changes. He asserted that Congress does not need to pursue a significant overhaul of the CEA because of these current flexibilities.
• Chairman Thompson remarked that the CFTC’s core principles have made the Commission resilient and adaptable to changes. He asked Mr. Sexton to address how derivatives markets have evolved since the CFTC’s 2008 reauthorization and to address the importance of reauthorizing the CFTC as derivatives markets evolve.
  • Mr. Sexton called the Committee’s process for reauthorizing the CFTC “very important.” He expressed appreciation for the Subcommittee’s solicitation of stakeholder feedback on the reauthorization. He remarked that the CEA remains effective in terms of enabling the CFTC to adapt to evolving markets. He stated that the Congressional reauthorization of the CFTC would signal the importance of the U.S.’s regulatory structure to the global derivatives market and would acknowledge the CFTC’s critical role in the market. He called it very important for Congress to reauthorize the CFTC.
• Chairman Thompson remarked that Congress has a responsibility to reauthorize the CFTC and commented that Congress should have already completed this reauthorization. He then noted how Mr. Antonsen’s testimony had raised concerns over the negative potential impacts of Basel III Endgame rules on the derivatives markets and derivatives end-users. He asked Mr. Antonsen to discuss these potential negative impacts.
  • Mr. Antonsen expressed concerns that the Basel III Endgame proposal could cause many FCMs to leave the market. He mentioned how his agriculture cooperative uses multiple FCMs and warned that a reduction in available FCMs would cause hedging costs to increase.
• Chairman Thompson asked Mr. Lukken to indicate whether FIA’s members are concerned about the impact of the Basel III Endgame proposal on end-users and other market participants.
  • Mr. Lukken remarked that there exist broad concerns across the derivatives industry regarding the Basel III Endgame proposal. He warned that this proposal would limit the capacity of people to engage in hedging activities. He noted how the U.S. has experienced a decline in the number of FCMs and warned that a further decline in the number of FCMs will make the U.S. financial system less safe. He expressed hope that prudential regulators will eventually fix the Basel III Endgame proposal.
• Chairman Thompson asked Mr. Lukken to indicate whether the Basel III Endgame proposal would result in more systemic impacts on the derivatives market.
  • Mr. Lukken remarked that the Basel III Endgame proposal would result in fewer FCMs, which would lead to greater market concentration. He stated that the U.S. should seek to increase the number of FCMs in the market to expand customer choice.

Rep. Jim Costa (D-CA):

• Rep. Costa raised concerns that the CFTC is being underfunded. He noted how there had been a proposal that would have permitted the CFTC to charge registered companies fees to support new oversight capabilities. He indicated however that the U.S. House of Representatives’s current funding proposal for the CFTC would cut funding for the Commission by $20 million. He asked Mr. Lukken to address how Congress could ensure that the CFTC is appropriately funded (especially if Congress is to expand the CFTC’s authorities).
  • Mr. Lukken expressed FIA’s support for providing the CFTC with full and appropriate funding. He mentioned how he had worked to educate Congressional appropriators on the need to support the CFTC during his previous tenure as acting CFTC Chairman. He raised concerns over proposals to establish CFTC user fees and commented that these user fees would discourage hedging activities (which would harm farmers).
• Rep. Costa interjected to ask Mr. Lukken to confirm that new CFTC user fees would be used to offset the proposed decrease in the Commission’s appropriations from Congress.
  • Mr. Lukken remarked that Congressional appropriators should find ways to provide sufficient funding for the CFTC.
• Rep. Costa asked Mr. Sexton to indicate whether the CFTC’s lack of authorization since 2008 could impact NFA’s funding.
  • Mr. Sexton discussed how NFA is funded in two significant ways. He testified that NFA’s overall budget is approximately $140 million and noted how NFA assists the CFTC in its regulatory activities. He indicated that the swaps industry completely funds NFA’s swaps regulatory program through membership dues. He estimated that this program’s budget is around $47 million. He then indicated that NFA’s futures regulatory program is funded through membership dues and assessment fees. He explained that NFA assesses a small fee on public trading volume and indicated that this fee is $0.02 per side.
• Rep. Costa asked Mr. Sexton to indicate the amount of additional resources that NFA would require to fulfill its new responsibilities if the FIT21 Act were to be enacted into law.
  • Mr. Sexton remarked that NFA’s resource needs would depend on its number of member firms and its oversight and regulatory responsibilities. He indicated that each of NFA’s regulatory programs needs to be self-funding. He stated that NFA would need to develop a new revenue source to cover its new oversight and regulatory responsibilities that would account for these new members.
• Rep. Costa then asked Ms. Thornton to address the current level of cryptocurrency-related fraud. He also asked Ms. Thornton to provide recommendations for addressing this fraud.
  • Ms. Thornton described the current level of cryptocurrency-related fraud as “quite substantial.” She remarked that policymakers should focus on the use of arbitrage within the cryptocurrency spot markets. She noted how cryptocurrency tokens rely upon different data streams, which can result in price variations across platforms.
• Rep. Costa interjected to ask Ms. Thornton to address how the U.S. could protect against cryptocurrency-related fraud.
  • Ms. Thornton noted how the SEC protects against fraud through requiring a national market system. She explained that different securities platforms are required to submit data so that a broker would know the prices being offered for a given security across different exchanges. She also noted how brokers have a fiduciary duty of best execution, which means that brokers must pick the best price for customers among the various exchanges. She stated that a similar system does not exist for cryptocurrency platforms.
• Rep. Costa indicated that his question period time had expired. He also expressed interest in how prudence and risks are measured in terms of bank capital requirements.

Rep. Max Miller (R-OH):

• Rep. Miller discussed how the U.S. agriculture industry uses a range of tools to manage risks. He also noted how the farm sector and other industries can access futures, options, and marketing contracts to manage risks associated with product and input price fluctuations. He called the ability of parties to address uncertainties thorugh commodity derivatives markets to address uncertainties “crucial” given rising input and production costs and tight commodity prices. He noted how recent global conditions and other instabilities have led to “exceptionally large” price volatility in many commodity markets. He remarked that commodity derivatives markets are essential for managing price risks and hedging exposures related to rising input costs, severe weather incidents, and volatile prices in fuel, fertilizer, and other essential items. He asked the witnesses to elaborate on the importance of derivatives products to their operations and the operations of their end-users. He also asked the witnesses to indicate whether the CFTC has the ability and resources to swiftly address and prevent harms through enforcement activities against bad actors.
  •  Mr. Antonsen called derivatives, futures contracts, and options very important for his agriculture cooperative and its members. He also mentioned how the U.S. is currently experiencing significant volatility related to severe weather, global markets, and global geopolitical events. He remarked that the tightening of farm margins underscores the need for hedging tools to be made available. He further stated that hedging tools can complement other risk management tools for farmers (such as crop insurance).
  • Mr. Sexton remarked that regulators are concerned about the impact that bad actors can have on derivatives markets. He testified that NFA works “very closely” with the CFTC’s Division of Enforcement to identify and punish bad actors. He indicated that NFA has quarterly meetings with this Division. He concluded that NFA and the CFTC are “very focused” on addressing bad actors.
• Rep. Miller then discussed how U.S. agriculture producers and global derivatives end-users often experience market volatility. He asked the witnesses to discuss how market participants can weather global uncertainties within commodities markets. He also asked the witnesses to discuss the available tools for agricultural producers, energy users, and other parties to deal with current market volatility.
  • Mr. Antonsen noted how the days that agriculture producers want to sell their agricultural products are not the same days that end-users want to purchase agricultural products. He stated that derivatives help agriculture producers to respond to market volatilities (including volatilities related to weather and export markets). He mentioned how most of his state of South Dakota’s agricultural production is exported out of the state and commented that world market volatility can harm these exports.
• Rep. Miller indicated that his question period time had expired. He also expressed interest in bringing foreign producers of genetically modified corn to a dispute panel under the U.S.-Mexico-Canada Agreement (USMCA).

Rep. Tracey Mann (R-KS):

• Rep. Mann remarked that CFTC reauthorization would impact his agriculture producer constituents that rely upon derivatives markets to manage their risks. He then asked Mr. Lukken to indicate whether there exist any gaps in the CFTC’s current authorities to address overseas fraud impacting U.S. markets.
  • Mr. Lukken remarked that he is not aware of any current impediments preventing the CFTC from pursuing bad behavior overseas. He noted how the CFTC can pursue actions involving U.S. citizens and market participants. He mentioned how the CFTC had used prosecutorial discretion in deciding whether to pursue overseas activities during his tenure as Acting CFTC Chairman. He testified that the CFTC would pursue these overseas activities when there existed a strong nexus to U.S. consumers. He noted how the CFTC would work with international partners to address these overseas activities. He asserted that the CFTC should not serve as the “police force of the world” for all activity and commented that the CFTC should only pursue activities involving a U.S. interest. concluded stated that the CFTC does not lack authority to address overseas activities impacting Americans.
• Rep. Mann then noted how Mr. Sexton’s testimony had described a U.S. District Court opinion that had called into question how customer property is defined under the CEA relative to the U.S. Bankruptcy Code. He asked Mr. Sexton to provide additional background on this issue and to address why this court opinion could be problematic for customers.
  • Mr. Sexton indicated that his concerns relate to a U.S. District Court opinion involving FCM bankruptcies and noted that these types of bankruptcies are rare. He recounted how the U.S. District Court opinion involved a case where there had existed a hole in a FCM’s customer segregated funds caused by a rogue trader. He indicated that the FCM in this case had lacked sufficient funds to make their customers whole. He stated that the U.S. District Court had considered whether the FCM’s customers would have priority over the FCM’s general creditors as part of the bankruptcy process so that the FCM’s customers could be made whole. He explained how the CFTC had previously issued a rule that allows for FCM customers to take priority over FCM general creditors in asserting their claims during the bankruptcy process. He noted however that the U.S. District Court in this case had questioned the legality of this rule based on certain provisions of the U.S. Bankruptcy Code. He remarked that Congress should address the uncertainty stemming from the U.S. District Court’s decision in this case. He commented that addressing this uncertainty would help to safeguard customer funds during FCM bankruptcies.
• Rep. Mann then noted how Mr. Lukken’s testimony had discussed the globalization of derivatives markets. He asked Mr. Lukken to discuss the importance of having global regulators coordinate and share information with one another as they surveille and regulate derivatives markets.
  • Mr. Lukken called it “incredibly important” that global regulators coordinate and share information with one another as they surveille and regulate derivatives markets. He described information as the “currency” for global regulators. He noted how the CFTC can obtain large amounts of information from U.S. markets through large trader reports. He explained that these reports ensure that the CFTC can observe sizable positions in U.S. markets to prevent manipulation. He called it important for the CFTC to have the ability to share this information globally so long as the information sharing supports enforcement activities. He commented that this information sharing occurs “quite frequently.”
• Rep. Mann asked Mr. Lukken to indicate whether detailing staff to and from foreign derivatives regulators would support the global sharing of knowledge and experience.
  • Mr. Lukken answered affirmatively. He mentioned how he had sent detailees to the United Kingdom (UK) when he had served as the CFTC’s Acting Chairman. He stated that these detailees had served as a key resource for the CFTC in addressing European markets during the 2008 Financial Crisis. He called information and personnel sharing between countries “very important.”

Subcommittee Chairman Dusty Johnson (R-SD):

• Chairman Johnson noted how Ms. Thornton had raised concerns that the CFTC’s establishment of a new regulatory regime for digital assets would be duplicative of the SEC’s efforts, complicated, troublesome, and problematic. He asked Ms. Thornton to indicate which federal agency currently has jurisdiction over fraud and manipulation in commodity spot markets.
  • Ms. Thornton indicated that the CFTC currently has jurisdiction over fraud and manipulation in commodity spot markets.
• Chairman Johnson asked Ms. Thornton to indicate which federal agency currently has jurisdiction over derivatives for non-securities.
  • Ms. Thornton indicated that the CFTC currently has jurisdiction over derivatives for non-securities.
• Chairman Johnson asked Ms. Thornton to indicate whether any federal courts have held that Bitcoin constitutes a security.
  • Ms. Thornton answered no.
• Chairman Johnson asked Ms. Thornton to indicate whether the SEC has ever asserted jurisdiction over Bitcoin.
  • Ms. Thornton stated that while the SEC should have asserted jurisdiction over Bitcoin, she indicated that the SEC has not asserted jurisdiction over Bitcoin.
• Chairman Johnson asked Ms. Thornton to indicate Bitcoin’s share of digital assets trading volume.
  • Ms. Thornton indicated that Bitcoin constitutes “roughly” 90 percent of digital assets trading volume. She emphasized however that there exist “hundreds” of other digital asset tokens.
• Chairman Johnson asked Ms. Thornton to indicate whether the FIT21 Act would provide the SEC with jurisdiction over the digital asset tokens that are not considered to be commodities.
  • Ms. Thornton expressed concerns that the FIT21 Act would undermine the SEC’s ability to oversee and regulate the digital assets market. She stated that the regulatory regime envisioned in the FIT21 Act would cause the SEC to belatedly oversee and regulate digital asset tokens that are already being traded on spot markets.
• Chairman Johnson interjected to dispute the accuracy of Ms. Thornton’s description of the FIT21 Act. He remarked that the CFTC already has a “robust” role in the digital asset commodity market. He also stated that the CFTC had proven the capability to successfully establish an entirely new regulatory regime for OTC swaps under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). He emphasized that most digital assets are commodities. He then asked Mr. Antonsen to explain his contention that CFTC reauthorization would constitute a “vote of confidence” in the U.S. derivatives market.
  • Mr. Antonsen remarked that CFTC reauthorization would provide farmers and agricultural businesses with confidence that the U.S. derivatives market would have integrity and would be efficient.
• Chairman Johnson asked Mr. Sexton and Mr. Lukken to address whether market participants care if Congress reauthorizes the CFTC.
  • Mr. Lukken remarked that the CFTC’s lack of reauthorization does impact confidence in the Commission (especially with foreign countries). He asserted that Congressional reauthorization of the CFTC would be easy, straightforward, and long overdue.
  • Mr. Sexton remarked that CFTC reauthorization recognizes the critical role of the Commission both domestically and internationally. He called it important for Congress to reauthorize the CFTC.

Rep. Zach Nunn (R-IA):

• Rep. Nunn first remarked that the CFTC has an important role to play in overseeing and regulating the digital assets space. He then stated that the U.S.’s derivatives markets remain the “envy of the world” and thanked the stakeholders for helping these markets to weather difficult situations in recent years. He then praised the work of the CFTC’s Whistleblower Program. He asserted that the Whistleblower Program is “crucial” for the accountability and protection of agricultural and financial markets. He mentioned how the Whistleblower Program had recently uncovered corruption at a company that had resulted in a $55 million fine. He noted how the CFTC’s Whistleblower Program accounts for a large portion of the Commission’s policing efforts. He warned however that Congressional inaction could cause the Whistleblower Program to become defunct due to insufficient funds. He indicated that the deadline for Congressional action is October 1, 2024. He mentioned how he had introduced the bipartisan and bicameral CFTC Whistleblower Fund Improvement Act to permanently address the Whistleblower Program’s funding challenges. He asked the witnesses to indicate whether they would commit to ensuring that the Whistleblower Program remains solvent.
  • Mr. Lukken answered affirmatively.
  • Mr. Sexton answered affirmatively.
  • Mr. Antonsen answered affirmatively.
  • Ms. Thornton commented that the CFTC’s Whistleblower Program is important. She stated however that she would require clear details regarding any legislation to modify the Program before she could opine on the legislation.
• Rep. Nunn asked Ms. Thornton to address what actions must be taken to ensure the solvency of the CFTC’s Whistleblower Program.
  • Ms. Thornton remarked that Congress should consider whether the CFTC’s Whistleblower Program constitutes a sustainable long-term approach for funding and supporting the CFTC’s enforcement activities.
• Rep. Nunn asked Ms. Thornton to address how the U.S. would discover bad actors without the CFTC’s Whistleblower Program. He stated that the U.S. needs to provide a clear avenue for people to report illegal activities to the CFTC.
  • Ms. Thornton remarked that the CFTC requires more funding to carry out its existing duties (including enforcement activities).
• Rep. Nunn stated that bad actors should play a greater role in terms of funding the CFTC’s enforcement efforts. He then raised concerns over the impacts of federal regulations on farmers. He noted how the average price of a tractor is nearly $500,000 in his state of Iowa. He asked Mr. Antonsen to address how the U.S. could ensure that the CFTC operates in a way that supports markets without imposing burdensome regulations.
  • Mr. Antonsen remarked that the CFTC and the regulatory environment for agriculture businesses is currently functioning well. He expressed concerns however that the U.S. agriculture sector will face greater challenges over the next two years.
• Rep. Nunn noted how the price of a bushel of corn in Iowa is $3.89 and indicated that the break even price for a bushel of corn is $4.85. He mentioned how the price of a bushel of corn had been over $8 three years ago. He remarked that U.S. farmers, farming communities, and the broader public will experience a spike in costs if regulation reduces the capacity of farmers to produce.

Subcommittee Ranking Member Yadira Caraveo (D-CO):

• Ranking Member Caraveo thanked Subcommittee Chairman Dusty Johnson (R-SD) for his collaborative approach to the Subcommittee’s work. She expressed interest in working in a bipartisan manner to address the CFTC’s activities, including the regulation of digital assets.