CFTC Chairman Announces New Financial Roadmap: Cryptocurrency, Prediction Markets, and Computing Power Markets

Written & Compiled by: KarenZ, Foresight News

More than a hundred years ago, when futures trading was just emerging, it was also referred to as "gambling" by American politicians.

Now, CFTC Chairman Michael S. Selig has brought this history back to light.

On August 20, local time in the U.S., during the first meeting of the Innovation Advisory Committee (IAC) of the Commodity Futures Trading Commission (CFTC), Selig spent considerable time reviewing the history of the futures market: in the 19th century, commodity exchanges faced blockades from state "anti-gambling" laws, and commodity options were long restricted. Ultimately, the U.S. chose to establish a unified federal regulatory framework to allow new financial products to develop under clear rules.

What Selig wants to express is not complicated: the debates surrounding Crypto, artificial intelligence, and prediction markets today are, in his view, not entirely new. What regulators really need to address is not just "whether to allow innovation," but how to bring innovation into a regulated market framework.

Therefore, at this meeting, Selig first fully unveiled what he calls the "Roadmap for the New Frontier of Finance."

The roadmap has three main lines: Crypto, AI computing power market, and prediction markets.

Among them, a significant signal affecting the crypto industry is that Selig still views congressional passage of legislation on crypto market structure as the preferred solution, but he also clearly stated that if relevant legislation continues to stagnate, the CFTC is prepared to explore using its existing legal authority to establish a regulatory system for the crypto asset market.

First Line: If CLARITY Continues to Stagnate, CFTC is Prepared to Act with Existing Authority

Crypto is the part of this speech with the strongest policy signal.

Selig first reiterated the Project Crypto that the CFTC and SEC are jointly advancing.

In January of this year, the SEC and CFTC upgraded the originally SEC-led Project Crypto to a project involving both regulatory agencies, hoping to resolve a core issue that has long plagued the U.S. crypto industry: which Crypto Assets are considered securities, which are not, and where the regulatory boundaries of the SEC and CFTC lie.

By March of this year, the two agencies further jointly released explanatory documents categorizing Crypto Assets into five types based on characteristics and functions: Digital Commodities, Digital Collectibles, Digital Tools, Stablecoins, and Digital Securities. The documents explicitly discussed scenarios where certain Crypto Assets do not fall under the definition of securities, as well as how activities like Protocol Mining, Protocol Staking, Wrapping, and Airdrop are treated under federal securities law.

However, for Selig, administrative explanations are not enough.

In this speech, he still views congressional passage of crypto asset market structure legislation as a more important and lasting solution, explicitly mentioning the CLARITY Act.

One of the core significances of the CLARITY Act is to further delineate the regulatory boundaries of the SEC and CFTC over the digital asset market through legislation and to establish a statutory regulatory framework for the relevant market.

What is truly noteworthy is the "Plan B" that Selig later provided.

He stated, if CLARITY ultimately continues to stagnate, the CFTC will begin to establish a regulatory system for the Crypto Asset market using its existing authority. To this end, he has requested CFTC staff to start researching rule-making proposals.

According to Selig's described vision, this proposal may eventually allow existing CFTC-registered entities and currently unregistered Crypto Exchanges to be designated by the CFTC as a special type of Designated Contract Market (DCM), namely the so-called "Crypto Asset Market."

These markets may subsequently offer leveraged or margin trading of Crypto Assets under CFTC regulation and specially designed rules.

The "may" here is very important. Selig's original words were that staff have already begun exploring rules and stated that the relevant framework could enable the aforementioned arrangements. Therefore, it cannot yet be understood as "the CFTC has approved Crypto Exchanges to become DCMs," nor can it be interpreted as an already effective market access system.

In addition, Selig revealed another piece of work worth noting for the DeFi industry: he has asked CFTC staff to communicate directly with developers of Onchain Finance Protocol to study how developers can legally and compliantly provide relevant protocols in the U.S.

This also does not provide specific exemption standards or regulatory conditions, but at least indicates that when the CFTC discusses crypto regulation next, the scope will not be limited to centralized trading venues like Coinbase and Kraken; on-chain financial protocol developers have also been included in the discussion of the regulatory framework design.

Second Line: Turning GPU Computing Power into a Market that Can be Priced and Hedged

Compared to Crypto, Selig's approach to AI is quite different.

The CFTC is not responsible for regulating AI models themselves. What Selig is focusing on is another asset behind AI: Compute, or computing power.

As the demand for high-performance GPUs for large model training and inference continues to grow, computing power has become one of the most important production factors for AI companies.

Selig's judgment is that as computing power becomes increasingly scarce and economically valuable, the demand for establishing spot, forward, and derivative markets around computing power will also emerge.

Simply put: currently, when companies purchase computing power, they often face price fluctuations, long-term supply, and resource allocation issues; if a more mature and transparent Compute Market is formed in the future, it could enable price discovery like energy or other commodity markets, while managing risks through forwards and derivatives.

Selig stated that the CFTC has already collaborated with the U.S. Department of Commerce and released a request for comments regarding Compute Markets a week before this speech, and the next step will be to study the relevant regulatory framework based on market feedback.

This means that what the CFTC refers to as "AI regulation" does not currently equate to regulating large models themselves. For a derivatives regulatory agency, its more direct entry point is: once computing power becomes a priced, tradable, and hedgable economic resource, how should the corresponding financial market operate.

Third Line: Prediction Markets Are No Longer Just About "Whether It Can Be Done," CFTC Begins Discussing "How It Should Be Regulated"

After the rapid development of platforms like Polymarket and Kalshi, a long-standing issue has become increasingly acute: do event contracts related to sports, politics, and other areas belong to federally regulated commodity derivatives, or should they be subject to state betting regulations?

Selig's attitude in this speech is very clear.

His position is that Congress has granted the CFTC exclusive regulatory authority over designated contract markets (DCM) for commodity derivatives; as long as they are legitimate derivatives, the CFTC will continue to uphold this federal regulatory authority, including defending its jurisdiction in court.

At the same time, he also acknowledged that historically, the CFTC has not established a sufficiently complete regulatory system for event contracts that addresses their unique risks.

Notably, Selig did not simply summarize the route for prediction markets as "liberalization." On the contrary, he listed quite specific regulatory construction plans in this speech.

First, the CFTC has proposed to amend Rule 40.11.

U.S. law stipulates that for certain categories of Event Contracts involving war, terrorism, assassination, gambling, and illegal activities, the CFTC can impose restrictions based on public interest. However, current regulations do not adequately define key concepts such as "gaming" and "involve," nor have they established a complete standard for public interest judgment.

Selig stated that the new Rule 40.11 proposed by the CFTC in June of this year aims to write these standards more specifically and establish a case-by-case review mechanism for contracts.

Second, the CFTC has proposed to redesign the data reporting system for fully collateralized event contracts. In the past, some event contracts relied on regulatory "no-action letters" to handle reporting obligations. The CFTC proposed a new regulatory plan in June of this year, hoping to turn this temporary arrangement into a formal, unified reporting system.

The third and next phase, which is more worthy of attention: Selig indicated that he expects the CFTC to soon propose a series of amendments to CFTC Regulations Part 38 and Part 40 to update the core principles and product listing rules applicable to Event Contracts.

Notably, he explicitly mentioned retail consumer protection, product governance, market design, and incentive programs.

This means that the current policy direction of the CFTC regarding prediction markets is not simply discussing "whether prediction markets are gambling," but is beginning to enter a more specific second phase: if viewed as a regulated financial market, what listing, governance, reporting, and consumer protection rules should exchanges comply with?

The Most Intense Moment of the Meeting Also Occurred in the Prediction Market

Compared to AI, the atmosphere around prediction markets is clearly more charged. This divergence erupted directly at the meeting.

CME Group Chairman and CEO Terry Duffy first clearly stated that he is a staunch supporter of the crypto market (having supported it since 2017 and being the first to launch crypto futures on CME) and holds a positive attitude towards the application of AI in risk management. However, when the topic shifted to prediction markets, his attitude became extremely severe.

Duffy pointed out the current chaos in prediction markets without mercy, also mentioning the "Maduro contract" (related to political events) and the "presidential teleprompter situation" contracts, bluntly stating that such products clearly have manipulation potential. Additionally, some sports event contracts are not only outcome-oriented but also involve individual performances, making them susceptible to human interference. Launching easily manipulable contracts would damage the entire industry's reputation and contradict President Trump's goal of "making America the crypto capital."

Selig directly interrupted Duffy, pointing out that the contracts he cited were not launched within the U.S. but occurred on overseas platforms.

Kalshi co-founder Luana Lopes Lara directly countered: "Since we were named, I want to ask, has there ever been any market manipulation issue in CME's history?"

Duffy did not back down: "If you want to debate, I am happy to. But I have more regulatory personnel than your entire company."

Lara retorted: "Then perhaps you should learn about efficiency."

Duffy then threw out a final, highly damaging retort: "Then perhaps you should learn what a trustworthy market is."

This debate actually explains why the CFTC is modifying rules. What prediction markets truly need to resolve are which events are suitable as contract subjects, what product review responsibilities exchanges should bear, how to monitor market manipulation and information advantages, and what protections retail users should receive.

What Did This First Meeting Truly Establish?

The role of the CFTC Innovation Advisory Committee itself is to provide advice to the CFTC on issues at the intersection of technology, law, policy, and finance. The views of committee members do not automatically represent the CFTC, nor do they directly become effective regulations due to a single meeting discussion.

Currently, IAC members span both the crypto and traditional financial markets, including Coinbase, Uniswap Labs, Ripple, Kraken, Gemini, Solana Labs, Chainlink Labs, Polymarket, Kalshi, as well as heads of institutions like CME Group, Nasdaq, Cboe, ICE, DTCC, Franklin Templeton, and Robinhood.

However, if we look at this meeting in conjunction with Selig's speech, it at least clarifies what the CFTC is preparing to do next:

In terms of crypto assets, prioritize waiting for Congress to establish market structure, but at the same time prepare to explore using existing authority to establish the CFTC's own crypto market rules; in terms of AI, attempt to develop computing power into a new commodity market with price discovery and risk hedging functions; regarding prediction markets, prepare to establish more systematic rules around event contract access, data reporting, market regulation, and consumer protection.

These three matters may seem quite different, but the regulatory thinking provided by the CFTC is actually consistent.

Selig repeatedly returned to one point in his speech: after financial innovation emerges, rather than waiting for disputes to disappear, it is better to determine market operation rules as early as possible.

Therefore, what is truly worth noting about this first IAC meeting is how the original commodity and derivatives regulatory framework should extend into the past when the subjects of the next generation of financial markets become the crypto market, computing power market, and prediction market.

From the roadmap unveiled by Selig, the CFTC has already decided to take action.