United States Commodity Futures Trading Commission

• 1. Introduction

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  The United States Commodity Futures Trading Commission started out watching a market built on grain. Congress created the agency in 1974, an independent federal regulator charged with policing futures, swaps, and other derivatives. Agricultural futures contracts had already been traded in the United States for more than a hundred and fifty years. They had been under federal rules since the 1920s. By early 2026, that same commission had shrunk to its smallest size in fifteen years. Its workforce had been cut by a quarter under the second Trump administration. The cuts arrived amid suspected insider trading on betting markets and suspicious trades tied to world politics. Both fall squarely inside what the commission is meant to police.

  How does an agency built to referee grain contracts end up entangled in political betting? And what counts as a commodity when the product being traded is the outcome of a vote?

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• 2. Origins of a Market Cop

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  The Grain Futures Act of 1922 gave the federal government its first real foothold in this market. The Commodity Exchange Act of 1936 replaced it and became the law the commission still enforces today. That law is the one that prohibits fraudulent conduct in trading futures, swaps, and other derivatives. The Commodity Futures Trading Commission Act, Public Law 93-463, transferred oversight away from the Department of Agriculture's Commodity Exchange Authority to the new independent commission. The first commissioners were seated in 1975, and William T. Bagley became its first chairman.

  Starting in the 1970s, futures trading expanded well beyond physical and agricultural goods. Foreign currencies, U.S. and foreign government securities, and U.S. and foreign stock indices all became fair game. In December 2000, Congress passed the Commodity Futures Modernization Act, directing the commission and the Securities and Exchange Commission to jointly regulate single-stock futures. Those contracts began trading in November 2002. In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act expanded the commission's authority into the swaps market. That market now carries a notional value above $400 trillion.

  That $400 trillion swaps market did not run itself, and the commission would soon have to define exactly which institutions fell under its watch.

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• 3. The Watch List

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  As of 2014, the commission's oversight covered designated contract markets, swap execution facilities, and derivatives clearing organizations. It also extended to swap data repositories, swap dealers, futures commission merchants, and commodity pool operators, among other intermediaries. Its job is not to audit every firm's balance sheet. Regulation aims at competitiveness, market integrity, and protecting participants from manipulation, abusive trading, and fraud, along with keeping the clearing process financially sound. One exception stands out: swap dealers and major swap participants, brought under the commission's authority by Dodd-Frank, must meet capital standards the commission itself sets.

  Four divisions carry out this oversight day to day. The Division of Enforcement investigates and prosecutes alleged violations of the Commodity Exchange Act. It can file complaints before the agency's own administrative law judges, in U.S. District Courts, or refer criminal violations to the Justice Department. The Division of Market Oversight handles new futures exchanges, swap execution facilities, and swap data repositories. It also conducts rule enforcement reviews and reviews of new products and market-related rule changes. The Market Participants Division was formerly called the Division of Swap Dealer and Intermediary Oversight. It registers and monitors commodity pool operators, commodity trading advisors, futures commission merchants, and swap dealers. The division also runs the agency's customer education efforts. The Division of Clearing and Risk oversees derivatives clearing organizations and assesses their compliance and risk; as of 2019, Clark Hutchison served as its director.

  The commission also coordinates with regulators abroad, among them the United Kingdom's Financial Conduct Authority, which supervises the London Metal Exchange. Its primary exchanges include the Chicago Board Options Exchange, the Chicago Board of Trade, and the Chicago Mercantile Exchange. They also include COMEX, the Kansas City Board of Trade, and the Minneapolis Grain Exchange. Rounding out the list are the North American Derivatives Exchange, the New York Mercantile Exchange, the New York Board of Trade, and OneChicago.

  Decisions about which cases to pursue rest with the commission itself, the five-member body that sits at the top of this whole structure.

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• 4. Five Seats, No Majority

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  The commission is headquartered in Washington, D.C., with regional offices in Chicago, New York, and Kansas City, Missouri. Five commissioners run the agency, each appointed by the President to a staggered five-year term. A commissioner may keep serving after their term ends, until a successor is confirmed. That extension never runs past the close of the next session of Congress following the term's expiration. The President, with the Senate's consent, picks one commissioner to chair the commission. No more than three commissioners at any time may belong to the same political party.

  As of the most recent roster, Michael Selig serves as chairman, a Republican. The other four commissioner seats sit vacant.

  Filling those seats is a separate question from an older fight, one that dominated the commission's history. That fight was over who gets to regulate a market that isn't traded on any exchange at all.

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• 5. The Swaps Fight

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  In 1998, CFTC chairperson Brooksley E. Born lobbied Congress and the President to bring 'off-exchange markets' for over-the-counter derivatives under the commission's oversight. Her warnings were opposed by other regulators.

  In a February 1998 comment letter responding to the SEC's 'broker-dealer lite' proposal, the commission warned the plan could conflict with the Commodity Exchange Act. Three months later, in May 1998, the commission issued a 'concept release.' It asked whether OTC derivatives needed regulation at all, and if so, what form that regulation should take.

  Legislation passed in 1999 at the request of the Treasury Department, the Federal Reserve Board, and the SEC. It limited the commission's rulemaking authority over swaps and hybrid instruments until the 30th of March 1999. The law also froze the existing legal status of swap agreements and hybrid instruments already in place. Its text read plainly: 'the Commission may not propose or issue any rule or regulation, or issue any interpretation or policy statement, that restricts or regulates activity in a qualifying hybrid instrument or swap agreement.'

  Born resigned shortly after Congress passed this legislation. She later pointed to the failure of Long-Term Capital Management and its subsequent bailout as exactly what she had been trying to prevent.

  Congress had drawn a legal line around swaps that would hold for years. Then an entirely new question arrived: what happens when the asset being traded is a cryptocurrency, not a security?

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• 6. Crypto as Commodity

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  In March 2014, the commission acknowledged it was considering how to regulate Bitcoin. It has since taken the position that Bitcoin qualifies as a commodity under the Commodity Exchange Act.

  In 2015, the commission ruled that cryptocurrencies, for trading purposes, were legally commodities too. It flagged risks tied to market volatility and other factors even as it set that classification.

  In 2017, the commission pointed to the SEC's warning against digital token sales and initial coin offerings. Such offerings, the warning said, could 'improperly entice investors with promises of high returns.' In October 2019, former commission chairman Heath Tarbert made a similar declaration about a second cryptocurrency. By then chief legal officer at Citadel Securities, Tarbert said ether also counted as a commodity under the Act.

  In recent years, the commission has widened its efforts to civilly prosecute fraud and misappropriation across digital asset markets. That mandate would soon face a new kind of trading floor, one built around the outcomes of real-world events rather than their prices.

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• 7. Prediction Markets Take Off

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  Kalshi launched in 2021 and became the first 'Designated Contract Market' built specifically for event contracts. PredictIt, an earlier platform, had operated under restrictive 'no-action' letters meant for academic research. Kalshi instead sought full federal registration, so it could offer legally cleared contracts to the general public.

  Polymarket, a decentralized platform built on the Polygon network, gained massive global traction around the same time. In January 2022, the commission fined Polymarket $1.4 million. It ordered the platform to wind down its U.S. operations for failing to register as a designated contract market. The action forced Polymarket to geo-block U.S. users for nearly four years. Even so, it grew into the world's largest prediction market by volume, processing more than $20 billion in cumulative trades by late 2025.

  In 2023, the commission tried to block Kalshi from offering contracts on which party would control Congress. It argued the contracts amounted to 'gaming' and ran against the public interest. A federal court disagreed. In a 2024 ruling in KalshiEX LLC v. CFTC, a federal court sided against the commission. The U.S. District Court for the District of Columbia held that the commission had exceeded its statutory authority. Political events, the court found, did not automatically count as 'gaming' under the Commodity Exchange Act. By late 2025, the commission had shifted toward what the record calls a 'deregulatory pivot' under new leadership. It dropped its appeal in the Kalshi case and cleared a path for Polymarket to re-enter the U.S. through a registered intermediary.

  The prediction market sector grew more than 130-fold between 2024 and 2025, with monthly volumes reaching $13 billion by the end of 2025. Robinhood, Webull, and Interactive Brokers all integrated Kalshi's event contracts into their platforms. That put prediction trading within reach of ordinary retail investors, the same way stock trading already was.

  Federal courts in Nevada and New Jersey have ruled that the commission holds 'exclusive jurisdiction' over these event contracts. Maryland and Massachusetts, by contrast, have secured court orders blocking sports-related trading, arguing it violates state gambling law. In May 2026, the commission, under the second Trump administration, sued to stop Minnesota from implementing its own ban on prediction markets.

  None of this activity solved the commission's oldest structural problem. Unlike the other four major federal financial regulators, it has never had the power to fund itself.

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• 8. Money, Cuts, and Oversight

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  During the government shutdown in October 2013, the SEC and the Federal Reserve stayed open. The commission did not, and futures and most swaps markets were left with, in one description, 'essentially no cop on the beat.'

  In 2007, the commission's budget supported 437 full-time equivalent employees. Funding rose 80 percent after the 2008 financial crisis, lifting staffing to 687 FTEs by fiscal year 2012. Staffing then fell to 682 FTEs the following year. That squeeze showed: in 2013, limited resources forced the commission to delay cases. Outgoing commissioner Bart Chilton warned that fiscal year 2014 funding hadn't kept pace with the commission's swaps market job. That oversight job had grown more than 40-fold, he said, covering tens of trillions of dollars in previously dark trading. He called the following year's budget request 'woefully insufficient,' warning it would leave the commission '100 less employees than we need.'

  In February 2014, commissioner Scott D. O'Malia dissented from the fiscal year 2014 spending plan. He argued it underfunded new technology while overfunding swap dealer oversight already duplicated by the National Futures Association. The following month, O'Malia dissented again, this time from the fiscal year 2015 budget request. He called it 'an unrealistic request for new staff and funding in this budget request without a firm understanding of its mission priorities, specific goals, and corresponding personnel and technology needs.'

  By December 2019, the commission finally secured funding for fiscal year 2020 that increased nearly 6 percent over the prior year's appropriation. Chairman Heath Tarbert said the funding 'fully matched' the commission's request, something that hadn't happened in 'nearly a decade.'

  The commission's headcount peaked at 760 employees in 2015, falling to roughly 550 by March 2026. That decline coincided with a sharp pullback in enforcement. Within the first two years of the second Trump administration, the commission announced no new enforcement cases against major cryptocurrency firms. That compared with more than 80 cases pursued under the Biden administration. The lax enforcement occurred under commission chair Caroline Pham and senior counsel Brigitte Weyls. Both went straight to work for cryptocurrency and prediction-market companies after leaving the agency.

  Roy Lavik served as the commission's Inspector General from 1990 until 2023. On the 3rd of May 2023, the Wall Street Journal reported that an oversight body had suspended him over allegations of 'Substantial Misconduct.' The allegations included divulging the identities of whistleblowers on multiple occasions. They also included misappropriating around $165,000 in funds for a hire who did little or no work. A third allegation was letting others use his username and password to access sensitive systems, in violation of agency security policy. Those complaints, according to the record, had been sitting since late 2018, nearly five years before the suspension became public in May 2023.

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