▶ 0:18:54>> I have been visiting with senator tuberville about sec football. I do not know that we settled anything but I got some information. With that it is my privilege to call the hearing. I think my colleagues for joining us today. We consider the nomination of Mr. michael selig to be chairman and commissioner of the commodity futures trading commission.
▶ 0:19:25Congratulations on your nomination. Thank you very much for your willingness to serve, and your family. These are always family affairs. As this committee knows well, the ctfc is the only federal financial regulator that oversees the agriculture and energy risk markets, the resiliency of which are critical to our commodity supply chains.
▶ 0:19:57Markets help our producers manage risk with volatility and natural disasters. In times when uncontrollable risk can wipe away years of -- future risks. The cftc has taken a principles-based approach to regulation that is engaged in constructive dialogue.
▶ 0:20:30This approach combined with diligent policing of the cash and commodities markets has led to trust in the cftc. The cftc's regulatory regime is time-tested and has helped the derivative market serve as the gold standard in withstanding external shocks with deep
▶ 0:21:01Expertise of the derivatives market. The cftc has seen the markets evolve over time, emerging markets such as crypto, derivatives have grown in size, and congress, including this committee is actively working on the cftc authority to regulate the digital commodity markets. Turning attention to the nuances with emerging markets which will focus on agricultural risk management markets is essential.
▶ 0:21:31It is my expectation that cftc leadership will strike this balance. I want to repeat what I have sent multiple times before this committee, the cftc is the right agency to regulate commodity trading. The cftc and only the cftc should regulate the trading of commodities. This is because only the cftc understands the unique characteristics of commodities and commodity-based contracts.
▶ 0:22:00The cftc has the right regulatory approach, expertise and skill set to handle this, it is up to congress to grant the authority to regulate commodity trading. Failure by congress to do so could make us vulnerable to bad actors and keep the U.S. behind the rest of the world. The regulatory framework is yet to be authorized by congress.
▶ 0:22:32Underlying technology are fast at work. Comprehensive U.S. regulatory framework, bad actors will continue to go unchecked and legitimate entities will be dis-incentivized from participating in U.S. markets. All the while U.S. consumer participation will continue to grow, as will the risks faced by consumers.
▶ 0:22:55The committee has an opportunity to advance its portion of the regulatory framework that protects customers and also allows U.S. businesses to grow and recognizes the importance of innovative block chain technology and fundamental principles.
▶ 0:23:15I want to thank senator booker for his partnership on a bipartisan discussion and I look forward to working with him and the rest of the committee to advance a bipartisan proposal. The time to act is now when I look forward to working with each of you. As this committee moves forward with this bipartisan proposal to grant cftc authority, I am eager to work with Mr. selig and cftc on ensuring get this right. It is so very important.
▶ 0:23:45I look forward to hearing from Mr. selig on these issues. Again, congratulations on your nomination. Senator klobuchar will join us in a bit. There is all kinds of stuff going on right now. We will have people coming and going. She will join us momentarily. We will now proceed with our witness introduction.
▶ 0:24:10Following the introduction, the ranking member will be around and we will recognize her at that time. I now recognize -- who will introduce michael selig. >> members of the committee, it is an honor to be before you.
▶ 0:24:30I have had this honor several times in the past as a nominee for commissioner and the chairman and I'm joined today by a number of other distinguished former commissioners and chairs. As they know and I know, this committee often beats in a much smaller room that features one of the most distinctive features of any of the architecture of the senate buildings and that is a simple table.
▶ 0:24:57This committee meet around the table in the same way american families, farmers and producers meet around their kitchen table to discuss issues of importance to them. It is one of the hallmarks of this committee that you do the same. I am here to introduce michael selig. He served for me when I was at the cftc as a law clerk. I got to know him back then in 2015 as someone of remarkable clarity, certainty.
▶ 0:25:31He was a fine colleague from the beginning as someone who immediately dove into our work. . Over the next 10 years he became an outstanding lawyer with the commodities exchange act. In 2022, when I joined a law firm, I invited him to join me. He came on and established himself and became a partner in the firm. No easy task in a large manhattan law firm.
▶ 0:25:58He did it with the same effortlessness, clarity and vision he had when he served for me as a law clerk. He stepped down from the firm and went to the sec and joined the crypto task force and now serves as an advisor to chairman paul atkins. The michael selig you will be hearing from his someone you will find it treats people with a fairness and evenhandedness that is very welcomed from a government official.
▶ 0:26:30He is hard-working, dedicated to coming up with the right outcomes but first hearing every point of view and getting to a balanced result. He is someone who has a great deal of respect for american financial markets, especially the markets overseen by the cftc . He recognizes one of the underpinnings of a strong american economy is these robust and strong markets but also markets that are very well regulated. He has a great deal of respect for the role of regulation.
▶ 0:27:02Most importantly he is determined to serve the producers, farmers, ranchers and everyday consumers who depend on these markets to serve their needs and hedge their risk. He is someone who will follow the example of his predecessors and make sure he gets around to the states represented here to make sure producers in those estates know these markets are serving their needs. In areas where perhaps they are not he can address the needs back in washington.
▶ 0:27:33Finally, I will leave you with this. . As someone who sat in that seat and chairman of the agency I think I know what it takes to be successful and serve the needs of america's. Characteristics that will allow him to achieve. A thank you for this opportunity to be at your table even though we are not in your room. I wish you a good hearing.
▶ 0:27:55Chair Boozman: Thank you, Mr. chairman. Senator klobuchar has joined us. I appreciate her flexibility in helping us get this arranged today. These are important positions.
▶ 0:28:10Sen. Klobuchar: Thank you. I appreciate it. Thank you, Mr. chairman for being here. I would also like to welcome your wife. I know she is here -- right there, very good -- and your parents.
▶ 0:28:31Sen. Klobuchar: I want to welcome the chairman, who has appeared many times before this committee, as well as cftc acting chairman and former cftc commissioners. As well as her. Thank you for being here.
▶ 0:28:52Sen. Klobuchar: The role of the commodity futures trading commission as we talked about could not be more critical as on-again, off-again tariffs, rising input costs and market fluctuations have created chaos for farmers and businesses. They need a well-functioning and reliable derivatives market to help them manage risk.
▶ 0:29:13Sen. Klobuchar: In addition to traditional commodities markets, the cftc has also seen significant growth in new markets, such as those for event contracts with trading volumes going from essentially nonexistent to billions of dollars.
▶ 0:29:32Sen. Klobuchar: Per month this committee is currently contemplating a discussion draft of legislation that would for the first time give cftc regulatory authority over spot markets and digital assets as their are also increasing. The cftc is also confronting broader shifts in market structure, including the growing influence of nontraditional intermediaries, the rise in integrated operations and moves to increase trading hours.
▶ 0:30:02Sen. Klobuchar: These developments raise important questions about the scope of the cftc's oversight and its ability to response with swiftly. To tackle these challenges head-on I believe it is in the public interest that the cftc not only have a confirmed chairman but also a fully functioning commission. That would include of course a democratic appointee -- in fact, two appointees.
▶ 0:30:29Sen. Klobuchar: The cftc has operated much of the past year without a full complement of bipartisan commissioners and has been operating for months with only an active chairman. This uncertainty around the leadership at the cftc has only created more chaos for people who rely on the cftc. Mr.
▶ 0:30:46Sen. Klobuchar: Selig, as you and I discussed when we met, it is also essential that the cftc have the institutional capacity both in staffing and resources to fulfill its mandate in the face of what are existing challenges and these emerging challenges and opportunities.
▶ 0:31:06Sen. Klobuchar: When the cftc has lost about 20% of its staff -- obviously were not there -- when that has been happening it is critical you ensure the cftc is able to maintain the U.S. derivatives market position as the deepest and most liquid in the world, and the cftc can provide robust protections for farmers and businesses across the country. Thank, Mr.
▶ 0:31:32Sen. Klobuchar: Selig, congratulations on your nomination and I look forward to the hearing.
▶ 0:31:36Chair Boozman: Thank you, senator klobuchar. Let's administer the oath. Please stand and raise your right hand. Do you swear or affirm that the statement you are about to provide is the truth, the whole truth and nothing but the truth, so help you god? Do you agree if confirmed he will honor the request to appear and testify before any committee of the senate? Very good.
▶ 0:32:05Chair Boozman: And with that you are recognized for your statement.
▶ 0:32:10Mr. Selig: Chairman bozeman, ranking member klobuchar and distinguished members of the committee, thank you for the opportunity to appear before you today is president trump's nominee for chairman of the commodity futures trading commission. I am grateful for the confidence to lead the cftc. I want to thank the members of the committee for taking the time to meet with me ahead of this hearing.
▶ 0:32:37Mr. Selig: If confirmed I look forward to working with all of you to pursue the cftc's important mission of integrity and vibrancy of america's commodity derivatives markets. It is an honor to have former commissioners and chairman in the room. Thank you for your guidance and mentorship. I am grateful to my best friend and wife, who is here today, for her unwavering support. I would like to thank my parents for joining me here.
▶ 0:33:06Mr. Selig: My parents impressed upon me the importance of hard work and instilled a deep love for the united states and its values. They inspired me with stories of my family's earlier generations who migrated here in the 1800s, fought for the union in the civil war, served in both world wars and the korean war, and pursue the american dream. My father was a district attorney and president of his local school board.
▶ 0:33:34Mr. Selig: He ingrained the value of public service. Early in my career I served as a law clerk for the cftc commissioner. He emphasized the importance of derivatives markets to all americans. Our nation's farmers, ranchers and commercial businesses allowing futures and swaps for risk management.
▶ 0:33:57Mr. Selig: Robust market for derivatives that allow to lock in press his ensure the cost of groceries, electronics and all kinds of goods and services do not fluctuate wildly for consumers each day. If confirmed I would welcome the vital responsibility to oversee the stability and security of these markets and protect consumers from fraud and manipulation. During my years in private practice I advised a wide range of participants subject to regulation by the cftc.
▶ 0:34:29Mr. Selig: From commercial users such as agriculture, livestock and energy businesses, to financial institutions, to new entrants, I have seen firsthand how regulators, unaware of the real world impact of their actions and zeal for regulating high enforcement, can drive businesses offshore and smother entrepreneurs in red tape.
▶ 0:34:58Mr. Selig: I recall helping an agricultural firm that was forced to divert significant time and resources from its business to defend itself and itself ain an investigation. Every day americans pay the price for these regulatory failures. Is confirmed, I am committed to instituting commonsense principles-based regulations that facilitate well-functioning markets and keep pace with the rapid speed of innovation.
▶ 0:35:27Mr. Selig: I have long believed in the mission of public service. This year I was honored to serve as chief counsel of the securities and exchange commission's crypto task force and senior advisor to the chairman. I have worked diligently to modernize the sec's regulations to reflect new and evolving technologies. I participated in the president's working group in digital asset markets and advised on derivatives policy matters.
▶ 0:35:57Mr. Selig: We are at a unique moment in the history of our financial markets. A wide range of new technologies, products and platforms are emerging. Vertical integration is becoming more prevalent. We are seeing unprecedented retail participation in commodity markets. The digital asset economy has grown from your curiosity to a nearly $4 trillion market. It is the american spirit to conquer new frontiers.
▶ 0:36:27Mr. Selig: All americans stand to benefit from a government that embraces technology, productivity and entrepreneurship. Together we can see this generational opportunity to modernize and -- ensure the great innovations of tomorrow are made in america. Is confirmed, I commit to you that the cftc will have a steady hand at the wheel.
▶ 0:36:53Mr. Selig: Is confirmed I pledge to work tirelessly with this committee to facilitate well-functioning markets, promote competition at innovation and ensure the cftc remains a world-class regulator in this golden age of american financial markets. Thank you for your time today and I look forward to your questions.
▶ 0:37:10Chair Boozman: Thank you, Mr. selig. Before I ask my questions, I would like to put letters of support from agriculture and other stakeholders for Mr. selig's nomination into the record. Without objection, so ordered. Mr.
▶ 0:37:30Chair Boozman: Selig, as this committee -- what key considerations -- why do you feel the cftc is the right regulator for spot digital commodity trade?
▶ 0:37:47Mr. Selig: Thank you, senator. Thank you for the time we spent in your office discussing these matters. It is a critical opportunity for this committee and our country to move forward with digital asset market structure legislation. It has been a priority of the president and it is great for this country.
▶ 0:38:08Mr. Selig: We have 70 entrepreneurs, builders -- we have so many entrepreneurs that have been pushed offshore due to a lack of clarity. We need clear, simple guidelines, consumer protection and regulation by enforcement. Allow for software developers to thrive. New exchanges to prop up and have the type of controls you would expect in an exchange.
▶ 0:38:37Mr. Selig: Make sure we have the right disclosure and requirements we have typically in our financial markets. I am excited about the opportunity to work with your committee on that.
▶ 0:38:45Chair Boozman: As the committee deliberates granting the cftc spot regulatory authority, how should we think about ensuring activities with respect to technology are not subject to inappropriate intermediary registration regimes?
▶ 0:39:03Mr. Selig: Thank you, senator. As I mentioned there is an issue of regulation by enforcement and sometimes we take a one-size-fits-all approach to all sorts of products and services. Blockchain enables a broad swath of services, applications. It may not make sense in many cases to apply financial regulation, for example a videogame app that runs on blockchain.
▶ 0:39:33Mr. Selig: We should be looking to markets and thinking about the futures of these applications and where there is an intermediary involved. Where we have an administrator. In many cases that may not be. We have to think of the best approach. I look forward to working with your office to figure that out.
▶ 0:39:53Chair Boozman: The next question I will ask is really important. Can you describe your experience working with agriculture stakeholders and how, if confirmed, he will balance emerging market issues with maintaining focus on agriculture risk management markets?
▶ 0:40:11Mr. Selig: I am very glad to have the support of about 20 of the large trade groups in the agriculture space. Agriculture is a very important constituency. The agriculture committee and the cftc, america's farmers and ranchers are the backbone of this country and it is important to have proper risk management tools available to them that are regulated by market regulators like the cftc.
▶ 0:40:41Mr. Selig: My commitment to the agricultural world is I will always be an open door to hear your issues. I am committed to being the sponsor and overseeing the agricultural. Advisory committee as was mentioned in the introduction, I plan to take a two were across the country and meet with the ag community in each of your states. It is important to be on the ground and really see where everything is done and understand the businesses.
▶ 0:41:13Mr. Selig: Being in private practice for many years, I find it valuable to understand everyone's business. I also plan to have a dedicated advisor in my office that will be an agriculture advisor who will advise me on these issues day-to-day. I hope to restore the agriculture convention that has been historically in kansas city. I plan to bring it back.
▶ 0:41:40Chair Boozman: Can you describe the importance of principle-based regulation and how it fosters innovation?
▶ 0:41:42Mr. Selig: Senator, yes. Principles-based regulation came out of the commodity futures modernization act. It has allowed for exchanges to have a lot of flexibility in how they comply with certain core principles that are important to ensure our markets have integrity, they are resilient and vibrant. That we protect investors from fraud and manipulation.
▶ 0:42:10Mr. Selig: The general guidelines protecting manipulation are there but the exchanges and market participants are able to figure out the best way to comply. But allows for innovation in business, with regulators figuring out the best way to help them get to a compliance state.
▶ 0:42:25Chair Boozman: Thank you.
▶ 0:42:26Sen. Klobuchar: Thank you very much. I will start with what is on the minds of a lot of our agriculture producers, farmers. As I discussed in my opening the cftc is dealing with markets and financial instruments getting increasingly complex. The core mission is to ensure the markets, farmers and ranchers are safe and reliable and function.
▶ 0:42:56Sen. Klobuchar: How do you envision the cftc continuing to preserve these markets as a practical risk management tool for farmers and other users?
▶ 0:43:05Mr. Selig: Thank you, ranking member, and I enjoyed the time in your office getting to discuss these issues. They are important to everyday americans. Over regulation can trickle down to the everyday consumer. Many of us are getting ready to head home for the holidays. The price of airfare can fluctuate based on jet fuel. Luckily we are able to lock in prices and hedge the risk.
▶ 0:43:31Mr. Selig: It is also something that affects the grocery store every day. It is important we have these risk management tools. It is vitally important we consider how overregulation of energy, agriculture, livestock, technology, that has an everyday impact on consumers.
▶ 0:43:53Mr. Selig: My intention is to modernize the rule set, making sure we figure out what works and what does not work and cutting back and what does not work, fixing things that are broken but not changing things that are not broken. I think it is vitally important that we modernize and get rid of the lore, no action letters, unwritten rules of the road where it is really hard for everyday americans to comply.
▶ 0:44:17Mr. Selig: If we put things in writing, we figure out what works, put it through the notice and comment process or do it through a staff process and make sure what we are putting out there is something people can follow, the understand and it can be complied with, and not something you need to hire a high-priced law firm to figure out.
▶ 0:44:37Sen. Klobuchar: Do you think you could do that with existing resources when you add the potential crypto portfolio and some of the new things coming your way for regulation?
▶ 0:44:47Mr. Selig: Senator, I'm looking forward to getting into the seat, and if confirmed I will take a hard look at the resource needs of the agency and look to do that assessment and get back to your office and work to make sure we have the resources to fulfill our critical mission.
▶ 0:45:03Sen. Klobuchar: What specific regulatory tools or approaches which are used to ensure innovation in crypto markets does not come at the expense of basic safeguards to protect the public?
▶ 0:45:15Mr. Selig: It is vitally important we have a cop on the beat. We cannot have another big loss of customer funds. The cftc has always been a regulator focused on protecting customer funds, making sure we have appropriate disclosure and protecting consumers.
▶ 0:45:38Mr. Selig: At the end of the day, these are critical markets and affect the price of groceries and as we are embarking into new digital domains, they can affect costs. I feel we have massively overregulated the real world economy. This affects agriculture, energy, crypto, and so.
▶ 0:46:04Mr. Selig: Much more if we can figure out what works and does not work, that will be the key to unlocking markets for every individual and making sure we do not constrain businesses and push them off shore.
▶ 0:46:13Sen. Klobuchar: You represented numerous direct numerous di -- derivatives while in private practice. How are you going to deal with conflicts of interest, especially when you will be the only person, is confirmed, on the commission?
▶ 0:46:30Mr. Selig: Senator, of course. That is a critical issue. Having come from a law firm, I will always hold myself to the highest ethical standards. I have been through a process with a nonpartisan office of government ethics and the staff at the cftc. I have an ethics agreement I have signed and planned to adhere to all of the terms of that. As a lawyer, I am very much one that follows the guidelines of the contract.
▶ 0:47:00Sen. Klobuchar: Following up on that, because I think it will be very critical for trust, there are no democratic members of the cftc right now. I know you cannot appoint them yourself. You have talked about the value of minority commissioners, in particular the leadership they can offer, working together.
▶ 0:47:29Sen. Klobuchar: What is your view on the importance of preserving voices of minority commissioners and will you advocate for the nomination and appointment of a full board, including two democratic commissioners at the cftc?
▶ 0:47:38Mr. Selig: I believe it is valuable to have a diversity of viewpoints. My parents encouraged me to join the high school debate team and I was always flipping back and forth between different issues and it pressure tests your thinking on things. Oftentimes you find out you are wrong. I think that is important to have diversity of views throughout the building.
▶ 0:48:03Mr. Selig: The president is the one who makes the decisions around nominations but I will work with whoever the president chooses to appoint.
▶ 0:48:10Sen. Klobuchar: In addition to the crypto coming your way, the volatility we have seen in the ag markets, there has also been growing interest in expanding trading hours, potentially leading to 24/7 trading.
▶ 0:48:30Sen. Klobuchar: If there are extended trading hours, what guardrails do you believe we need to protect investors and prevent price dislocations, especially in lower volume markets like agriculture futures?
▶ 0:48:46Mr. Selig: As I mentioned there is a confluence of new technologies and changes in our markets we need to be vigilant about. I hope to work with all constituents and figure out what is appropriate for each market. It is not one-size-fits-all. What works for crypto may not work for pork bellies. We need to look at this on a market by market basis and I look forward to those discussions with the commission and this committee if confirmed.
▶ 0:49:11Sen. Klobuchar: Thank you. I continue to believe if you are given a mandate with rulemaking that you most likely are going to need more resources. I just don't know how you keep doing what you are doing now 20% down on staff and that a new mandate that this will all work, no matter how good your background is or other commissioners who have come before. When we get the full slate that will continue to be an issue and I hope the white house will respect that.
▶ 0:49:42Sen. Klobuchar: Thank you very much.
▶ 0:49:43Chair Boozman: I very much agree with that.
▶ 0:49:48Sen. Hyde-Smith: I enjoyed our meeting earlier. I appreciate your willingness to serve, as I said before, on all the issues we talked about. They are important to mississippi. I am sure we will have a lot to work on together as participants emerge, the agency must adapt to rising demands and increasing pressure on its limited resources.
▶ 0:50:18Sen. Hyde-Smith: The commission deserves recognition for how effectively it has managed these emerging duties so far. Congress now weighing legislation that may expand the cftc's jurisdiction, the challenges ahead are likely to become even more significant.
▶ 0:50:37Sen. Hyde-Smith: My question is, how do you plan to ensure the cftc remains focused on its supporting transparent future markets, especially for our farmers and ranchers, will also establishing a new regulatory framework and taking an increased responsibility for rapidly evolving digital asset market, and what makes the cftc well suited to take on this responsibility?
▶ 0:51:06Mr. Selig: Thank you, senator. I, too, very much enjoyed our conversation this morning. If the cftc is not doing its job at making sure our markets are working for our agricultural firms, farmers, ranchers digital economy, it is simply not working. We need to make sure these are well-functioning markets. It is my responsibility if confirmed as chairman to get the job done.
▶ 0:51:37Mr. Selig: We need to be vigilant in our surveillance efforts and examination efforts of market participants and making sure we are policing manipulation the markets. Vista cftc's responsibility for overseeing these markets are well-functioning and efficient and take that very seriously and intended to do that job.
▶ 0:51:55Mr. Selig: I think some of the massive overregulation of participants -- particularly the fcm community -- were many farmers and ranchers are reliant on these entities to access derivatives markets. If they do not have access, they will not be able to hedge their risks and that is concerning. That can result in volatility in the markets and affect everyday consumers.
▶ 0:52:23Mr. Selig: I am committed to making sure the markets are well-functioning and appropriate risk management tools are available to our nation's farmers, ranchers, and everybody else.
▶ 0:52:32Sen. Hyde-Smith: Thank you. I have no further questions.
▶ 0:52:37Sen. Smith: Thank you. Welcome to the committee, Mr. selig. I want to start by associating myself with the questions senator hyde-smith and senator klobuchar asked about the big potential change in the mission of the cftc with regard to digital commodities and what that would mean for the cftc if it were to take on the additional challenge.
▶ 0:53:04Sen. Smith: You described it at a high-level look at I just pressed you a bit more on this? What do you think it would take -- what would be the first two or three things you would do? How would you approach this with more detail as the cftc takes on this significant new focus, potentially, depending on what happens in congress?
▶ 0:53:30Mr. Selig: Thank you for that question, senator. It is vitally important we have certainty, clarity and protection in the markets. They are being used by everyday americans. Having real guardrails are run with the market looks like is critical. I applaud the efforts of this committee as well as others within the congress for putting together comprehensive bipartisan market structure legislature. That is the first step.
▶ 0:53:59Mr. Selig: Once we get legislation in place, it is vitally important to implement with haste, because if these markets are going to keep developing, we have to keep pace with the rapid speed of innovation. There are a lot of things we can do with existing authority and I would very much take on the mission of making sure our investors are protected in this market. The cftc has authority to police fraud, manipulation in the crypto spot markets.
▶ 0:54:28Mr. Selig: They can regulate future markets. When there is leverage in financing involved in the transactions.
▶ 0:54:34Sen. Smith: I will move onto my next question. What I'm asking is more of a management question. I understand you can describe what the mission of what the organization is supposed to be doing, but the question of how you manage this transition is what I'm trying to get at, and perhaps other members of the committee are trying to get at. I would like to move to another question.
▶ 0:54:59Sen. Smith: In 2018, the supreme court gave states the power to decide whether to legalize sports betting. In my home state of minnesota, we have not done that. Minnesotans can bet on sports online anytime they want to.
▶ 0:55:20Sen. Smith: As I'm sure you also know, through the indian gaming regulatory act, tribes have the authority to regulate gaming within the reservations, including sports betting. Is seems to me there is a conflict because we have these prediction market platforms, which are offering sports wagers on tribal land, with no tribal oversight.
▶ 0:55:48Sen. Smith: Sports betting firms will argue that state and tribal laws do not apply because they are offering these event contracts. It seems to me that this could be a semantics difference without an actual practical different so people in minnesota do not know if they are doing a sports wager or event contracts which are.
▶ 0:56:10Sen. Smith: Putting aside this distinction between sports event contract and a sports wager, cftc regulations prohibit event contracts. If confirmed, can you commit to enforcing that? Tell us a bit about how you see this issue.
▶ 0:56:26Mr. Selig: Thank you, senator. As someone who spent many years practicing law at law firms and studying in law school, these are complex issues as to interpretation. I have the utmost respect for judges working on these issues in the court system and I intend to always adhere to the law and follow what judicial decisions need to be followed. I also believe these issues are something to work through together.
▶ 0:56:59Mr. Selig: Some are congressional issues to whether we change. I was not at the cftc at the time this portion of the act was drafted. I was not working on this committee or on the hill. . These are challenging interpretive questions I will look to the courts on.
▶ 0:57:16Sen. Smith: It seems to me the cftc's prohibition is unambiguous and congress has made it clear when he gave the cftc two prohibit certain gaming contracts it intended to prevent gambling through these futures contracts. It seems to me this is a semantics difference and we should be able to count on the cftc to enforce the law. Thank you very much.
▶ 0:57:43Chair Boozman: Senator tuberville.
▶ 0:57:47Sen. Tuberville: Mr. selig, congratulations on your nomination. A common complaint from participants in the markets is cftc has been failing to do the basic blocking and tackling of its core responsibilities. Obtaining a license from the cftc has become significantly more costly and time-consuming.
▶ 0:58:13Sen. Tuberville: How do you plan to restore the cftc's reputation along these lines?
▶ 0:58:18Mr. Selig: Thank you, senator. I really enjoyed our time in your office talking through these issues. You raise a very important issue at the cftc. Having spent many years in private practice working with clients who want their applications processed and get answers on their important questions, it is vitally important the cftc gets the attention the participants deserve.
▶ 0:58:43Mr. Selig: As I mentioned in my opening statement, the staff regulation by enforcement and the rule by unwritten law through interpretive guidance that is not provided in a sort of written form, what we call lore in many respects, is unacceptable. We need to staff to work together with applicants to get business is going.
▶ 0:59:08Mr. Selig: If confirmed, my job is to get the agency running like a business, to really make sure applications come in and they are processed quickly and efficiently so people can go on with their business. That will be a key priority of mine. I intend to evaluate the process is currently in place to make sure they are efficient. If there are steps are necessary we will take about. If there are things need to do we will add them to the process.
▶ 0:59:36Mr. Selig: I want to make sure people are not waiting six months for a phone call from the staff.
▶ 0:59:40Sen. Tuberville: Will you commit to resolving outstanding issues with cross-border trade flows?
▶ 0:59:46Mr. Selig: Senator, thank you. That is another important issue before the commission. It is critical we have compliance in place for it makes sense. We need to deregulate with our allies and make sure they are allowing for our market participants to enter their markets. We should do the same. It is vitally important to remove the blockages.
▶ 1:00:09Sen. Tuberville: How would you balance enforcement actions with providing clear forward guidance?
▶ 1:00:17Mr. Selig: Senator, as I mentioned earlier, we have massively overregulated the real world economy. We have pushed people off shore regulation by enforcement. Smothered them in red tape. Have not allowed them to do the things they do best -- be creative and build great businesses. I would remove barriers that are in their way from success.
▶ 1:00:44Mr. Selig: I think the most important thing is I mentioned is to remove a lot of these unwritten rules of the road, create clear and simple guidelines. You do not need a high-priced law firm to figure them out. I would make sure our forms are efficient and easily understood and work with stakeholders to figure out the best path forward. I would love to work with the committee on these issues.
▶ 1:01:08Sen. Tuberville: I would like to hear your thoughts on something I hear a lot from our bitcoin miners. Bitcoin, crypto is a commodity. If we sell corn, cotton, we pay taxes on it when we sell that commodity. When a bitcoin is mined, irs is standing next-door, ready to get their money from this bitcoin. What are your thoughts on that?
▶ 1:01:36Mr. Selig: I think blockchain enables commerce and great economic mechanism designed, where people can participate in these networks like the bitcoin network, earn rewards and earn a living by contributing to these networks. They are vitally important infrastructure. We should have them built in the united states. We should make sure we are protecting our miners.
▶ 1:02:03Mr. Selig: With some of the areas beyond the scope of the cftc's remit around tax and other things, it is vitally important we were together with the treasury and other agencies within the administration to make sure we are providing the right incentives.
▶ 1:02:17Sen. Tuberville: It seemed a little unfair to me if you are a miner, you have to pay taxes on it immediately and not wait until we sell it. We hear the complaint all the time. I hope it is something we look into and encourage more mining. Thank you very much. Simple to
▶ 1:02:40Simplen. Lujan: Thank you for taking the time to come by. We are working to provide cftc with more authority. The new authority would be an enormous duty. The cftc is a small agency compared to the sec. Do you believe the cftc would deem more funding and staff to properly oversee digital assets but markets?
▶ 1:03:10Mr. Selig: Senator, thank you for that question. I enjoy taking the time to meet with you and having the opportunity to talk to crypto and other issues. Once I'm in the seats, I can take a much better look -- if confirmed -- at the resource needs of the agency. I'm eager to get into the seat and make that determination.
▶ 1:03:34Sen. Lujan: Would it surprise you there have been one or two people over there that have any expertise?
▶ 1:03:39Mr. Selig: I believe there is a great career staff at the agency and I'm looking forward to working with them. I believe many of the agency staff are well-equipped, understand our commodity markets.
▶ 1:03:55Sen. Lujan: I do not know why it is hard to say we need more staff and needs from staff. This is a whole new space we are building in the united states of america. I think he would find bipartisan support. People want to hear that we want to make it investment as united states of america in this space. I'm real surprised it is so hard to get that.
▶ 1:04:23Sen. Lujan: I'm guessing president trump wants to see a robust cftc in this space?
▶ 1:04:29Mr. Selig: Center, I cannot speak for the president but my view is the cftc has a critical mission to protect the markets, safeguard investors. I will see that that is carried out, whether we need more resources are not. Once confirmed I will make that assessment. It would be irresponsible to prejudge the issue.
▶ 1:04:51Sen. Lujan: Have you looked at the current composition of the cftc?
▶ 1:04:55Mr. Selig: I am familiar with the composition of the staff but I would have to be in the sea to understand what roles everyone is performing. We can do more with less with the innovation of technology. Once confirmed I look forward to making those assessments.
▶ 1:05:11Sen. Lujan: Can you identify the need at the agency? Will you come back and asked for the resources if needed?
▶ 1:05:19Mr. Selig: Senator, of course. I will absolutely make that assessment and if so would be happy to have those discussions.
▶ 1:05:28Sen. Lujan: I will take that as a yes. I'm concerned about the ftx debacle. There were many conflicts of interest that led to massive fraud. What are your views on the deeply integrated structures of major digital asset companies?
▶ 1:05:45Mr. Selig: Thank you, senator. One of the great things that came out of ftx, as much as it was a massive disaster, is the cftc's regulated dcm -- it was fully funded. The assets in the clearinghouse were not lost, which was great. It shows regulation works.
▶ 1:06:16Mr. Selig: That is why I commend the committee in congress moving forward with bipartisan market structure and legislation. It is vitally important we protect investors and customer funds and intend to do so if confirmed as chairman.
▶ 1:06:28Sen. Lujan: Does it create risk?
▶ 1:06:31Mr. Selig: Vertically integrated structures are one of the novelties we see in our markets today. The cftc's principles-based regime allows for more innovation in the way businesses are structured. We need to comply with the same principles and requirements.
▶ 1:06:50Mr. Selig: To the extent a vertically integrated structure raises conflicts issues, that might be addressed differently and there might be additional requirements in place to protect but the bottom line is we should always make sure the same protections are in place and investors are just as safe with a vertically integrated structure as without. If confirmed it is something I look forward to considering and figuring out the best way forward.
▶ 1:07:13Sen. Lujan: Is it fair to say that under your watch you will not allow an ftx to happen again?
▶ 1:07:20Mr. Selig: As I mentioned the other day manipulation and fraud are only bounded by the ingenuity of man. It is always hard to prevent --
▶ 1:07:29Sen. Lujan: Let me ask the question this way -- under your watch if you identify a loophole that would allow an ftx fraud, criminals or crooks to exist that she will close them?
▶ 1:07:41Mr. Selig: The cftc will be a strong cop on the beach under my leadership and I intend to adhere to the law and enforce the law.
▶ 1:07:52Sen. Lujan: I asked you if you had security clearance and you do not have one yet. You will need to get one. I suggested as soon as you can, learn about all the bad actors that are out there doing bad things.
▶ 1:08:12Sen. Lujan: One of the things that recently happened is the president pardoned some guy -- I do not know what the company's name is -- it is publicly noted at the sec and other places that terrorists were using this dude --terrorists! Are you ok with that?
▶ 1:08:40Mr. Selig: Senator, I am not familiar with all the facts of the matter but I will always uphold the law.
▶ 1:08:47Sen. Lujan: It is public facing. I will make sure I submitted to the record. You are at the sec now, correct?
▶ 1:08:56Mr. Selig: That is correct.
▶ 1:08:58Sen. Lujan: You probably have more access to information over there than I do. The president said he does not know this guy. The guy pled guilty to doing all sorts of ugly things. I do not think anyone here wants to see any of this stuff. I certainly hope you keep your character when you are in this position, as I shared with you in the office, and you are not asked to compromise yourself.
▶ 1:09:25Sen. Lujan: You are a person of character, michael, and that is your reputation. I help you do everything to maintain that and you do good in the space. You are probably one of the most knowledgeable people going into the space in a regulatory role. We could not allow crooks to get away with things. We cannot allow terrorists to get away with things. I hope we can work together in a strong, bipartisan way.
▶ 1:09:51Sen. Lujan: I appreciate the work of the chairman and my colleague, senator booker, with what they have put together. I look forward to seeing more of that work.
▶ 1:10:00Chair Boozman: I agree regarding funding. Making sure we have adequate funding for the agency. 2, I think your other questions concerning ftx and all those other things, that is why we need to work hard to get a good market structure built that is good -- structure bill that is good for the industry and protect the consumer.
▶ 1:10:29Chair Boozman: I suggested the same thing regarding security clearance. That is good.
▶ 1:10:37Sen. Hoeven: Thank you for our visit. Before we talk about the digital asset issue, very important our farmers and ranchers be able to utilize the futures market to hedge the crops they grow and the livestock they raise. Very important. That is your traditional role.
▶ 1:11:05Sen. Hoeven: I want to hear from you how you will make sure we are making that system work as well as possible, in an open, clear, transparent way for our farmers and ranchers the need to be able to rely on it.
▶ 1:11:19Mr. Selig: Thank you, senator. As I mentioned earlier, it is vitally important that we protect our farmers and ranchers and ensure they have the tools they need to manage risk. Make sure the markets are fair, orderly and efficient, there is no fraud to interfere with prices of commodities in these markets. It is vitally important we understand that many of these markets have been mass of throughout the chain.
▶ 1:11:49Mr. Selig: We have seen fcm's and other intermediaries highly, highly regulated such that costs are being passed down to farmers, ranchers. We are seeing less introducing brokers able to take on these clients.
▶ 1:12:05Mr. Selig: Some of the ones with the large volume, they are not banks, and some of the risk management functions at the farmers' and ranchers' businesses are not willing to work with these firms. We need to take a hard look at where we are regulating and making sure it is essential. I'm in favor of the minimum effective dose of regulation. We should not have more reporting than necessary. We should not have more requirements than needed.
▶ 1:12:35Mr. Selig: If we get the right regulation in place, these businesses will thrive, we will see more risk management, more farmers, ranchers, more every individuals using these tools to manage their business risks and that will be better for all americans.
▶ 1:12:51Sen. Hoeven: Right. For the large, sophisticated users, they always managed to figure out how to comply with all the different rules and that sort of thing. Are you focused on making sure for that family farmer or family rancher, that they are able to access the futures market in a way that they understand, that is transparent, and works for them?
▶ 1:13:19Mr. Selig: Senator, absolutely. They need to have clear and simple rules of the road that they understand and need access to the tools to manage risk.
▶ 1:13:30Sen. Hoeven: In the digital asset space, have you looked at both the house legislation and the proposed senate legislation? Does it provide you -- in your opinion, does that provide th opinion, does that provide tthe statutory and ability to build the regulatory framework in a way that will make sure there is transparency, and that people understand what is going on with these digital markets?
▶ 1:14:01Sen. Hoeven: As senator lujan said just a minute ago, that people are adequately protected?
▶ 1:14:08Mr. Selig: Senator, thank you. One area we discussed earlier is the breadth of what is happening. There are blockchain networks and assets. The legislation -- this is a great, great effort to bring clarity, certainty and consumer protection to these wide-ranging novel markets.
▶ 1:14:34Mr. Selig: I believe the legislation -- the efforts in this committee and the clarity act and the efforts in the house are absolutely critical. They provide the scaffolding and infrastructure we need to make sure we c1 that we have requirements around consumer protection and provide authority to the cec and sec to flexibly regulate.
▶ 1:14:59Mr. Selig: There will be a lot of work to be done to implement these statutes and I'm excited for you all to get the legislation done and I think these are both great efforts.
▶ 1:15:09Sen. Hoeven: Are you prepared to help members of this committee make sure they understand what is being done in this space and accomplished with this legislation? But also what additional safety measures may need to be in place to get the job done fully and well?
▶ 1:15:30Mr. Selig: Senator, yes, I think one of the benefits of having spent many years in private practice and working as the chief counsel of the crypto task force at the sec as I understand what is good and bad and make sure we protect our investors.
▶ 1:15:48Sen. Hoeven: Thank you.
▶ 1:15:51Chair Boozman: Senator booker.
▶ 1:15:54Senator Booker: I want to put into the record that the witness appears to be so young I don't think you can drink alcohol.
▶ 1:16:17Chair Boozman: You are only 50?
▶ 1:16:17Sen. Booker: You are man. -- mean. Let his cruelty be noted in the record.
▶ 1:16:26Chair Boozman: I meant he looks a lot younger.
▶ 1:16:31Sen. Booker: He does that. People on both sides of the aisle seem to have a lot of hope in your leadership. I'm just grateful for the chairman and the ranking member paul's, their partnerships with me over the last few weeks to put together regulations on spot digital regulations.
▶ 1:17:02Sen. Booker: Working on the policy related to digital assets working with this committee as well as senate banking. But even with rules of the road, we both know it is critical we have regulators that are capable, competent and who oversee the market and enforce the rules which we have already talked about to quite some extent.
▶ 1:17:22Sen. Booker: You spent the last seven months at the sec which is a much larger regulator in terms of staffing, scope and scale and you are aware that the sec has more employees.
▶ 1:17:43Sen. Booker: You have heard it from multiple senators from both sides of the aisle and a couple of a men's from the chairman that there is a real problem right now with capacity in the agency that you are up to lead and I'm hoping that is something you've heard and that you are more bold in asking us we hopefully get you more responsibility that you start standing up for more of the resources necessary to do something that is vital when it comes to safety and security.
▶ 1:18:16Sen. Booker: I remain deeply concerned by a lot of issues of corruption we are witnessing. I have a real problem that a president can issue a coin. That to me opens up the door to a whole bunch of ethics problems. We are seeing that right now with this white house making billions of dollars with foreign nationals investing in that coin.
▶ 1:18:40Sen. Booker: I'm really concerned about how agencies have lost a lot of and -- lost a lot of independence and are being weaponized to go after political enemies. There was an undermining of regulators that serve taxpayers. There are politically motivated firings and more.
▶ 1:18:58Sen. Booker: I'm just going to say should you be confirmed I hope you will prioritize this idea that congress has had over generations now that agencies such as yours should be independent agencies above politics fighting for the best interests of americans in an era where I think corruption is on the rise in american government and a lot of people are worried about trust. I want to say that for the record and I hope you can be the kind of leader that maintains that kind of independence.
▶ 1:19:28Sen. Booker: I want to get into some of the corruption we are seeing in american sports right now. It would be hard to miss in the past month that the nba and mlb players were indicted by the fbi to manipulate -- indicted by the fbi for tems to manipulate -- attempts to manipulate games. Regulated sports books caught the suspicious activity.
▶ 1:19:59Sen. Booker: Given these recent events, it is all the more concerning that sports event contracts are being offered without the same monitoring. All designated contract markets must comply with 23 cftc core principles specifically number three that requires contracts must not be readily susceptible to manipulation.
▶ 1:20:23Sen. Booker: So you are going to be right there should you be confirmed and I want to make sure that you have strong integrity and your monitoring systems in place to ensure athletes, coaches, league employees or any close family or friends of such individuals are not manipulating america's pastime, america's greatest sport, I would say football, and more.
▶ 1:20:50Sen. Booker: The last thing I want to go over is the greatest state in america clearly you agree with me is new jersey. It is historic. Our great garden state is the east coast home of gaming in the U.S. industry and employees -- guards close to $2 billion in revenue. America should be thinking new jersey more.
▶ 1:21:18Sen. Booker: We did the work to legalize sports betting across the united states. We were the ones fighting in court across the last decade to get that legalization but new jersey also fought for years to bring sports betting into the legal fold then to be sued by those platforms and waste taxpayer dollars fighting for this right.
▶ 1:21:44Sen. Booker: It is important to me and I will end with this that the sparks contract have enforcement mechanisms, over half of the country's chief law enforcement officers say these contracts break state law. I'm frustrated the cftc hasn't acted and I will let that be my real question to you after my statements.
▶ 1:22:06Mr. Selig: Senator, thank you, and I do look forward getting the opportunity to meet. New jersey is of course the great state. My wife sitting behind me is from new jersey.
▶ 1:22:22Mr. Selig: --Sen. booker: you married up if you married a jersey girl.
▶ 1:22:30Mr. Selig: As are my parents. They are from the area. To the extent any of these event contracts constitute gaming, that is a question for the courts.
▶ 1:22:45Mr. Selig: If the products are self certified and the cftc is allowing them to trade in the markets, of course it is vital the cftc ensure those contracts are not in manipulated, that they are not readily susceptible to manipulation, that is her principal and if confirmed, that would be something I would of course.
▶ 1:23:01Sen. Booker: Judges might hand down a decision in agreement with jersey. I'm hoping you will then follow those courts and stop them from operating in states where judges find them to be contravening state gambling laws. I'm hoping you and I can discuss it. This is a committee that has a lot of bipartisan agreement and this is the space I hope you and I can have a dialogue on.
▶ 1:23:32Sen. Booker: Thank you very much.
▶ 1:23:33Chair Boozman: Thank you. Senator slotkin.
▶ 1:23:38Senator Slotkin: Thank you, chairman. Thank you for our meeting. I'm over here, I'm at the bottom of the dais. The issues I asked you about in my office are going to be the same ones I asked you here.
▶ 1:24:00Senator Slotkin: You have a record working with the crypto industry and my issue is oversight and making sure that I can turn back to michiganders and say if you are going to make the decision to invest in crypto, but you are not going to be scammed or defrauded out of that money. The cftc since the 1930's was set up as a five commissioner body. Two democrats, two republicans and whoever is in power gets the chairmanship.
▶ 1:24:31Senator Slotkin: We are all working on a market structure bill, I voted on a version of that in the house but that is when we had five commissioners who created this push and pull, this greater sense of oversight. If confirmed, you will be the only one on this body. I know you said yesterday and today you want to hear from different views, debate team, the whole thing.
▶ 1:24:59Senator Slotkin: Do you support two democrats, two republicans being with you on this commission?
▶ 1:25:03Mr. Selig: Thank you, senator. As you know and as I said yesterday, I do very much appreciate having different viewpoints.
▶ 1:25:13Sen. Slotkin: I got that.
▶ 1:25:14Mr. Selig: Of course. As I mentioned as well it is the president's decision to nominate candidates.
▶ 1:25:23Sen. Slotkin: But what would your advice to him be? You are going to be the guy hanging out there by yourself and the administration has systematically dismantled commissions, the national labor relations board, the consumer product commission. They have been dismantled.
▶ 1:25:44Sen. Slotkin: We have a new industry, crypto and I'm supportive of figuring out good regulation, but would your advice to him be like hey, man, give me some balance so I have the ability to say this is an independent body? What is your advice to the president on this issue?
▶ 1:26:01Mr. Selig: Senator, I would certainly respect the president's decision on these issues. My role and my job if confirmed as chairman is to fulfill the agency's mission and I believe that is best -- best fulfilled when we have a diversity of viewpoints wherever we can find those.
▶ 1:26:19Sen. Slotkin: I get that and good, but for those of us who want to get to yes on a market structure bill, who want to be proactive, having some sense that there is some oversight, that it isn't just going to be you vulnerable to the pressure of the president as the only one there I think many of us will be watching, certainly me. On sports events contracts, senator booker can talk all about new jersey he wants.
▶ 1:26:47Sen. Slotkin: Michigan is the number two online casino and sports betting state. The tribes and are licensed sports prediction markets are the one who control that. My understanding is that the cftc regulations are clear on this issue that sports contracts should not be allowed because they are equivalent to betting, gambling.
▶ 1:27:15Sen. Slotkin: In your opinion, should sports events contracts be lifted -- listed through the cftc?
▶ 1:27:19Mr. Selig: Thank you, senator, this is a really complicated issue. So I will respect the decisions of the courts. I'm also very interested to work with this committee to the extent that there are views we need to change anything one of the statute.
▶ 1:27:40Mr. Selig: As a chairman of an agency, I will look to the views of the courts and congress as the supreme court has said, we have to look to the courts.
▶ 1:27:54Sen. Slotkin: I appreciate that. You said you hadn't met with the tribes yesterday, I encourage you to meet with the folks in this business. President trump announced he is launching his own truths predict , that would basically support event contracts. And that they be traded.
▶ 1:28:18Sen. Slotkin: If the president asks you for a carveout or exception so that truth predict can be listed, how will you respond?
▶ 1:28:26Mr. Selig: Senator, I will always uphold the law and stick to the law. He would go through the same process and everyone else.
▶ 1:28:39Sen. Slotkin: That is true and I hope you would be very careful about exceptions. He invented this thing and you would be the only guy in the hot seat you would have to get an exemption from. I yield back.
▶ 1:28:56Chair Boozman: Senator schiff.
▶ 1:28:59Senator Schiff: Thank you, Mr. chairman. From california across the country prediction market platforms have been offering so-called event futures contracts and we have been asked about this. Right now I can go on kalshi and predict who will win the thursday night football game.
▶ 1:29:26Senator Schiff: I can make six dollars if I predicted the next coach as. It sounds a lot like gambling to me. They market themselves as financial products and market themselves as sports betting but there is no economic utility to the contracts, no price discovery being facilitated. They are offering gaming products with no regulation and I think that is in violation of state law and sovereignty.
▶ 1:30:01Senator Schiff: One of them being gaming and second the contract being contrary to the public interest. They deem all five of these enumerated activities as contrary to the public interest. That is terrorism, assassination, wargaming, or unlawful activity under federal and state law.
▶ 1:30:25Senator Schiff: We have seen a proliferation of sports events contracts even of the vast majority of states say it violates state and tribal law. The cftc has failed to offer guidance. I would hope you would defer to the courts and abide by court decisions.
▶ 1:30:47Senator Schiff: But what is your view on whether these are gaming in violation or whether these are some kind of different contractual obligation that has some kind of economic merit, intrinsic economic merit?
▶ 1:31:05Mr. Selig: Thank you senator. As you know as a good lawyer, the answer is always it depends and that is why these are questions for the courts. They are really complicated issues.
▶ 1:31:18Sen. Schiff: Let's talk about the bills game tomorrow night. So I go on my phone and I place a bet on who wins the game. Sports gaming?
▶ 1:31:30Mr. Selig: It would be irresponsible for me to prejudge that issue.
▶ 1:31:35Sen. Schiff: If I were to go into a casino and make a bet or a facility that legally offers sports gaming and bet on the bills game should it matter whether I'm doing it in a licensed facility? Is it a different animal if I do it on my phone through an app? Does it change the nature of the gaming bet, what technology I use to make it happen?
▶ 1:32:04Mr. Selig: Senator again I would look to the courts on these questions and facts and interpretation of the law. It is a complex issue I will follow with the court's say and to the extent there need to be changes because the law was drafted in a way that is difficult to comprehend, I'm here to help with that effort.
▶ 1:32:25Sen. Schiff: Let me break it down more simply, if you and I bet on who wins the bills game tomorrow, would you consider that gambling?
▶ 1:32:33Mr. Selig: Senator, on this issue I would look to the courts. I would look to what the courts say about that issue and I think it is still working its way through so once we have an outcome we can rely on and interpret within the agency.
▶ 1:32:51Sen. Schiff: If betting on who wins or loses a football game is not gaming, is not sports gaming , what do you think sports gaming is? Can you give me an example of something that is clearly sports gambling? There may be some complex questions as you say, but this is certainly sports betting. What can you say?
▶ 1:33:12Mr. Selig: Many, lengthy legal opinions have been written on one word and the statute and I would really want the benefit of understanding what the judges think about the issue. This could be one that works its way all the way up to the top so I will look to the courts.
▶ 1:33:27Sen. Schiff: Should I take it from your answer that you are top below rossa on this, that you are not coming into this with any preset ideas as to whether a future events contract that predicts who wins a football game, you are not coming into this with any preconceived idea whether that is gaming or not?
▶ 1:33:47Mr. Selig: I think it would be irresponsible of me to prejudge that issue so I will come to the issue with a blank slate in look to the courts.
▶ 1:34:00Sen. Schiff: I would join with senator slotkin and urge you to meet with those deeply affected by this issue which includes the tribes as well.
▶ 1:34:10Chair Boozman: Senator warnock.
▶ 1:34:14Senator Warnock: Thank you chair boozman and congratulations, Mr. selig, on your nomination, welcome to you and your family. I have to say I think you enter this nomination process under a great deal of pressure.
▶ 1:34:32Senator Warnock: Congress had created a bipartisan commission and there is just one republican commissioner left who by default is the acting chair running the agency. You are the president second nominee following opposition from some of the president's richest friends to the previous nominee.
▶ 1:34:57Senator Warnock: I want to follow up a little bit on my colleague's senator slotkin's question. Do you believe having an incomplete cftc including zero minority commissioners hampers the effectiveness of the cftc?
▶ 1:35:14Mr. Selig: Thank you, senator. As I mentioned earlier, I do believe it is important to have a diversity of viewpoints. The cftc has a vital mission --
▶ 1:35:26Sen. Warnock: Was that he asked?
▶ 1:35:28Mr. Selig: The cftc is able to function with a single chairman as it has been with an acting chairman but I do believe as I mentioned it is very important to have a diversity of viewpoints.
▶ 1:35:40Sen. Warnock: So you think this is a good situation that we have a cftc with one chairman even if we negotiate crypto market structure legislation which could grant cftc new authorities to oversee a $4 trillion market?
▶ 1:35:55Mr. Selig: Senator, I believe it is important that the cftc carry out its mission the way that it is designed of course is that it can function with one chairman if necessary so it can carry out its mission and I would take that very seriously of confirmed.
▶ 1:36:11Sen. Warnock: Here is why this is so important. We are currently negotiating this legislation and many of us who are engaged in these negotiations have called for provisions that commissioners from both parties be appointed to the cftc to implement any crypto legislation and speaking to leaders in the crypto industry.
▶ 1:36:38Sen. Warnock: They tell me it is critical to them that crypto laws and regulations have bipartisan support. This is what we are hearing from the industry. Do you agree having bipartisan support behind new cryptocurrency regulations would help ensure stability? And durability of these policies beyond this administration?
▶ 1:37:01Sen. Warnock: And be better for both the industry and the investors long-term so you are not suffering from whiplash depending on whether it is a democrat or republican administration? Is that a fair assessment?
▶ 1:37:13Mr. Selig: Senator, as I mentioned earlier, I really commend the efforts of this committee to develop bipartisan crypto legislation, I think it is important to get both viewpoints and the notice and comment rulemaking process is a great way to get a diversity of viewpoints through comments.
▶ 1:37:36Sen. Warnock: We are not getting a minority input from the agency on how it would impact -- implement such a complex piece of legislation and that is making this harder. Basic consumer and investor protection are the pillars of a sound facility.
▶ 1:38:03Sen. Warnock: Last week senator boozman released an asset class discussion which was an important starting point but key sections remain under negotiations. Investor traction is critical in the crypto markets are heavily focused on retail investors.
▶ 1:38:30Sen. Warnock: What new authorities does the cftc need from congress to ensure consumers are treated fairly in your view?
▶ 1:38:40Mr. Selig: Thank you, senator. As I mentioned earlier, the cftc has existing authority to police fraud and manipulation, but bipartisan legislation can take that to a further level by ensuring we have market regulation for these markets, things like registration, examination of these platforms, making sure consumer funds are safe and secure and working well with the sec one the disclosure
▶ 1:39:11Mr. Selig: Requirements to the extent that there are securities being offered in connection with a digital asset showing there is disclosure. All of these things can work really well together to make sure we have a robust and resilient regime around crypto.
▶ 1:39:23Sen. Warnock: The cftc is the only financial regulator that is funded entirely by appropriations ended the -- and in the bluesman-booker discussion draft, they authorized more funding to prepare the agency to implement day massive new regulatory structure. Do you support $150 million to implement this?
▶ 1:39:54Mr. Selig: Thank you, senator. If confirmed I really want to get in the seat and understands the needs of the agency so it would be hard to take you up on the exact amount.
▶ 1:40:04Sen. Warnock: Do support any new funding for the cftc?
▶ 1:40:08Mr. Selig: It would be premature for me to take a view on new funding. I think anyone coming into a seat with many staff and systems in place, I need to understand the processes and then I can make a decision on that.
▶ 1:40:22Sen. Warnock: I think it is an important question and we have got to have adequate resources to protect consumers. I look forward to continuing the discussion on this issue. Thank you.
▶ 1:40:35Chair Boozman: Thank you, senator warnock. And in regard to that, I think the committee as a whole is with you 100% regarding having adequate funding. We have been talking to the administration about how important that is and I will commit as we go down that path, have a hearing as we need to. We are going to make sure that we do have that.
▶ 1:41:06Chair Boozman: The other thing was also recognizing the importance of having democrats or republicans on the commission. Talking to the administration, working with senator klobuchar, senator booker. The next step is getting senator schumer to actually nominate somebody. We want to go through the process where it is not republicans picking who you want, but it is you yourselves.
▶ 1:41:38Chair Boozman: Senator schumer will nominate somebody so we are also working with him.
▶ 1:41:43Sen. Warnock: I'm heartened by your commitment to a bipartisan commission.
▶ 1:41:47Chair Boozman: If the roles were reversed, I would be saying the same thing, so thank you. Senator klobuchar, do you have anything?
▶ 1:42:05Senator Klobuchar: Yes, I want to follow-up on just a few things. Should you be confirmed will you commit with working with congress to ensure the whistleblower program is continued in a consistent manner?
▶ 1:42:23Mr. Selig: Thank you, senator. I will commit to that. It helps align incentives when people are afraid to come forward because of retaliation risk.
▶ 1:42:34Sen. Klobuchar: Having worked at the sec, would you commit or I guess my better question, how would you approach coordinating with the sec and treasury on overlapping issues to avoid regulatory gaps? There has been the roiling up issue.
▶ 1:42:58Mr. Selig: This is an important issue and I think it is critical that the sec and cftc another regulators work well together. There are so many products and services that have fallen through the cracks and it is hard to comply and we have discussed many of these interpretive questions.
▶ 1:43:20Mr. Selig: Many of that is for the courts but sometimes the agencies have to make decisions as to what sits where and I'm committed to working well with my current boss at the sec as well as others within the administration to make sure we get things right for our americans.
▶ 1:43:35Sen. Klobuchar: Given that the cftc was structured by congress as an independent commission, does it have in your view an independent obligation to determine the legality and the appropriateness of its actions and the regulations it adopts?
▶ 1:43:55Mr. Selig: Senator, I think that is an important question. To the extent the cftc has deference authority on certain issues where it has been granted that from congress than the cftc will go ahead under my leadership and interpret it where it is expressly told to do so but of course we will always follow the law and where it doesn't have deference authority of course we look to the courts.
▶ 1:44:20Sen. Klobuchar: I mentioned contracts in my opening and once again we are back to the resource issue. Do you think the cftc has the resources to oversee this vast new market that presents different characteristics from the traditional derivatives markets?
▶ 1:44:38Mr. Selig: As I mentioned earlier, this is a critical aspect of the jurisdiction of the agency to the extent it is added through the legislation and the cftc needs to take that seriously. It has an important mission of making sure there is investment protection and that these markets are sound and safe, so I take that very seriously and if confirmed I will take a very close look at our resources to make sure we have everything.
▶ 1:45:08Senator Klobuchar: Thank you very much.
▶ 1:45:12Chair Boozman: Thank you, senator klobuchar. Thank you, Mr. selig, for appearing before the committee. To the committee members, thank you for your participation and the staffs on both sides working so hard to make these things happen. The record closes at 6:00 p.m. Tonight the hearing is now adjourned. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap.org]