Unchained - Bits + Bips: What CFTC Oversight Could Mean For Crypto As Trump's Chair Pick Crosses Key Senate Hurdle - Ep. 957

Episode Date: November 22, 2025

Thank you to our sponsors! Mantle Walrus President Donald Trump's pick for chair, Mike Selig, has cleared the Senate Agriculture Committee just as lawmakers look set to hand over crypto oversight to the agency. In this episode, former CFTC Chair Chris Giancarlo joins Unchained Executive Editor Steven Ehrlich to unpack Selig's Senate hearing. Chris shares his experience working with Mike, why the CFTC should get more resources to handle crypto and crypto's unique commodity trading structure. He also touches on the challenges the agency could face regulating crypto, whether exchanges should be allowed to continue performing several functions under one umbrella, the timeline for CLARITY and the regulatory path ahead for prediction markets. Host: Steve Ehrlich, Executive Editor at Unchained Guest: J. Christopher Giancarlo, Former Commissioner of the CTFC Links: Unchained: Prospective CFTC Chair Says It’s ‘Vitally Important to Have a Cop On The Beat’ in Crypto Senate Committee Shares Bipartisan Draft on Crypto Market Structure Bill The Chopping Block: When Wall Street Meets DeFi — How Equity Perps and RWAs Redefine Leverage On-Chain DEX in the City: Are Prediction Markets Gambling, and Who Should Regulate Them? Polymarket Quietly Relaunches in U.S. in Beta Mode: Report Timestamps: 🚀 00:00 Introduction  ⚡️1:41 Chris details his experience working with Mike Selig 🤔 6:34 Does the CFTC have enough resources to handle crypto? 📽 10:34 Crypto’s unique commodity trading structure 🧱 13:37 The challenges the CFTC could face with crypto's unique trading structure 🤔 15:15 Should crypto exchanges remain vertically integrated? 💡17:25 How DeFi should be regulated 🧏 20:46 Why Chris says crypto perps do not need new laws 🔮 24:49 Mike's confirmation timeline 💥 25:46 Why prediction markets are important 👀 27:57 Why Chris compares the regulatory trajectory of prediction markets to Uber 💡 28:57 What regulations could look like for prediction markets Learn more about your ad choices. Visit megaphone.fm/adchoices

I think the crypto community is excited about Mike, but so is the whole CFTC community. So there were 20 different ad groups that wrote to the ad committee endorsing Mike's nomination of CFTC chair. So it's not, you know, Crypto Bro goes to CFTC. This is somebody who's had a decade-long practice in all aspects of CFTC law and jurisdiction and is accomplished on all those areas. Hi, everyone. Welcome to Bits and Bibs the interview. I'm your host, Steve Ehrlich, executive editor, Anna Chene. I'm here with a good friend of mine, Chris Giancarlo, former chair of the Commodity Futures Trading Commission.

Welcome, Chris. Steve, being called a good friend by you means a lot to me. Thank you. I feel the same way. It's great to be on with you. Yeah, appreciate that. We have a lot to discuss today. One of your former employees, Mike Seelich, the chief counsel of the SEC's Crypto Task Force,

was just nominated to be CFTC Chair, had his nomination hearing yesterday, so we're going to break all of that down. But before we do, let's just take a very quick break to hear from sponsors to make the show possible. Mantle is pioneering blockchain for banking of revolutionary new category at the intersection of Tradfai and Web3. Follow Mantle underscore official to learn more. Built by the team behind Swee, Walrus is the global data layer for Web3. And with the launch of seal, developers now get permission to access controls built right into that data layer. Together, Walrus and Seal make Web3 data private, programmable, and verifiable by default. Learn more at walrus.xyZ. Okay, so I think when Mike was

nominated by President Trump a few weeks ago, he was met with universal praise from the community, and I think that that wasn't just because we had grown tired of waiting to see if Brian Quintana was actually going to be approved. You know him very well because he used to work for you. I'm wondering if you can maybe share one or two anecdotes that could just sort of illustrate like why the community is so excited to have him as the presumptive CFTC chair.

Yeah. So let me give you a little of the background. So in 2014, I think it was late 2014, my then chief of staff, Jason Gagans, decide we're going to start an intern program in my office for law students. And a number of them came through over the next, actually, three years. Mike was one of the first and immediately impressed me with just his native intelligence and his interest in commodity futures, which, you know, it's not like the hottest topic in law school back in a decade ago. And then finally, he's just good natureness. I mean, he just was easy to have around. He was easy to have on the team.

And because of that, we brought him into more and more aspects of our work at the commission. And by no means back in 2014, 2015, was a big part of our docket having to do with crypto. It had to do with all the traditional things that you deal with at the CFTC, from agricultural futures to financial futures to administrative issues, to legal issues. And Mike's work was excellent. Anyway, he obviously returned. the law school, graduated from law school, and went out and began to practice. And to my delight, his practice was in CFTC matters. Anyway, I carried on at the CFTC. I completed my five-year term left in 2019. And in January 2020, I joined the law firm of Wilkie Foreign Gallagher here in New York City, where I am today. In one of the very first calls I made, well, part of my understanding with

the firm is I would build a digital practice that we call Wilkie Digital Works. And to build that team, I reached out to Mike Seleague, whose work had gone on and grown, and he had become more and more focused on digital assets. And I asked him to join me here, which he did in 2022. And, you know, everybody else saw what I saw in him. And he quickly became, worked his way up to become a partner in the firm, which is no easy task in a large international law firm. You've really got to know your stuff. And Mike knew his stuff. So the point I want to, and then in January of this year, Mike was recruited to go and joined the Crypto Task Force, then under Hester Purse, and then eventually he went on to the staff of Chairman Paul Atkins. Now, Paul and I were law school classmates. I've known Paul

since the early 80s, and I recommended Mike to Paul and said, you know, you've really got to work with this guy's terrific. And a lot of that good work led to his nomination, the CFTC. The point your audience needs to understand is, yes, I think the crypto community is excited about Mike, but so is the whole CFTC community. So there were 20 different ad groups that wrote to the ad committee endorsing Mike's nomination of CFTC chair. So it's not, you know, Crypto Bro goes to CFTC. This is somebody who's had a decade long practice in all aspects of CFTC law and jurisdiction and is accomplished on all those areas and who himself, though, is a big believer in digital transformation and has established themselves there as well.

So his support is really broad-based, not limited to the digital asset community, but is very strong in the digital asset community. Got it. And actually, I was remiss before. I should have mentioned that aside from just your long history with Mike and your knowledge about the CFTC confirmation process, Mike invited you to introduce him to his hearing yesterday. As a remarkable honor, not unprecedented. When I was first myself and my first confirmation hearing to be a commission.

Tim Massid was nominated to be chairman, and Senator Blumenthal introduced Tim Massid at that confirmation hearing where I was also being confirmed or having the hearing on my confirmation. So it's not unprecedented. I think it is unprecedented to have a former chairman as opposed to a member of Congress to it. It was a tremendous honor for me, which I began my remarks, thanking the committee for the honor. As I noted, I'd been before the many times. but to be before them to introduce a protege of mine for his nomination was a great honor. It should might be confirmed.

He will be the 16th chairman of the CFTC. I served as the 13th chairman. So it's really remarkable to see someone who served 10 years ago go on to have that honor. And I very much hope he gets it. He's earned it. I hope he gets it. Yeah, absolutely. So let's get into the hearing.

I mean, it touched on, I think it was about two hours longer. So it touched on a lot, a lot to do with crypto. In fact, the first two questions from Chairman Bozeman were related to crypto, which I think is kind of historically important in and of itself. But one of the, I think one of the big issues that kept coming up on a bipartisan basis was whether or not the CFTC has enough resources to oversee spot crypto prediction markets and everything else that the CFTC does that has nothing to do with digital assets. So maybe let's just talk about that.

first. Okay. What is your sense? The SEC has 5,000 employees. CFTC has about 600. Crypto is, depending on given day, two, three trillion, four trillion dollar market. And then there's the rest of commodities. Does the CFTC have the resources? Right. So look, Mike was very clear. He said, look, I don't get to a portion of resources. You do. Congress does. I don't. He was pressed say, by senators saying, yes, but would you use your influence on the president to, you know, get these appropriations done or to compress Congress to get these appropriations done? And Mike rightfully said, look, you know, just I'm a lowly appointee. I don't get to tell the president or Congress what to do.

And I can relate to that. I mean, when I was in that chair, you know, I had to take the same position. I mean, you know, the Congress of the White House have only so much resources to allocate. And the last thing you want is every head of every agency going back and demanding their portion of it, you know, on a public record. Now, I as a former chairman and no longer in government have been very vocal and remained so that I believe the CFTC has to have more resources to allocate to this. And I believe that the drafts of the Clarity Act that are circulating will give the CFDC as much as $150 million more resources. But it's not from Mike to say, and his job is to get confirmed, and then he'll be in a better

position. His position was, I need to see the budget. I need to better understand it. As a former chairman, I'm happy to say that they need more resources. Now, one other thing that I'll say that's a little bit more controversial. I think those resources should come from industry. You know, if I want to take my company public and I go to the SEC and file a registration statement, I've got to pay for the review of that registration statement.

There's a fee. And that's not too different than what every one of your viewer does in their own life. If you want to put an addition on your kitchen and you submit plans to the town, the town's going to tell you to pay the fee of the examiner of the building inspector to do that, right? And that's only fair. It's getting a car inspector. Well, exactly. Why should your neighbors? Why should the taxpayers pay for you to do that? You should pay for it.

And I feel the industry should pay for the registration of tokens on a spot exchange at the CFTC. Now, that's controversial. In the futures markets, registrants do not pay the fees. It's paid by, basically, by the taxpayer. And I'll leave that one alone. That's been around for a long, long time. But in a new industry like crypto, I think it's only fair. and as an advocate for this industry, I think it actually makes the industry stronger that we're looking after our, you know, we're paying our own way. And I think that makes this more palatable to the taxpayers out there that couldn't give a wit about crypto. They just want to make sure that they're not paying too much in taxes. So I think it's only fair, but I don't think you're going to hear that from Mike Selegg anytime soon. His job is they get to get into the chairman's

role and start running the agency. Yeah, it seems like it might align with like the principal's first approach to regulation that the CFTC has as well. Absolutely. Okay, so let's get into it. Overhanging all of this is the market structure bill. I don't necessarily want to talk with you about that today because we have limited time. And I want to really focus on things that you're uniquely qualified

to talk about because of your history at the CFTC. You and I have spoken many times about SPOC commodities markets and how they're very different than securities. There are information in symmetries built. in. That's just how these things work. They're offering decentralized. They're done like OTC block trades. But now we have these large exchanges that are sort of like, that are acting like more traditional exchanges, but they're going to oversee spot commodity. What are the challenges that he's going to face in overseeing this type of market? Yeah. So it's a very good point.

And so for your audience understands, historically, most commodity futures, which is what the CFDC regulates, derivatives on commodities. In other words, what is it going to be buying or selling the future price of wheat or corn or oil, most of those commodities came out of the ground. And most of the spot sales, meaning I'll sell it to you to immediately in return for cash immediately, were regulated at the state level, not at the federal level. And that's because those transactions take place inside of a state. A farmer sells as wheat to the grain elevator in the next town over. That takes place in that state. It's not a federal transaction. But when these futures markets developed, they developed in major cities like Chicago, Kansas City, and New York, and they became national markets.

And so the CFDC was formed to regulate these national markets in derivatives, in futures and forwards and options. that traded on these national exchanges. And so you have this anomaly that the spot market is not regular at the federal level to regulate the state level, but the derivative markets are regulate the national level. Along comes crypto. And in crypto, you have both spot markets. I want to buy five Bitcoin now. Or you have derivative markets.

I want to buy Bitcoin futures to basically take a view as to where the price will be six months from now. Right now, if it takes money, place six, if you're buying or selling something, it takes place six months for now, that's federally regulated by the CFTC. But if you do a spot transaction, it's not regulated at the national level. And yet, unlike ag markets, those spot markets are national if they're not indeed international. And so the argument is that when it comes to crypto, unlike ag futures, the regulation of the spot market should be done at the national level, which means the CFTC. That is actually one of the big areas of this new bill, what we call the Market Structure or Clarity Act, where there's bipartisan agreement.

I spoke to many Democrat senators yesterday, Republican senators. It seems to be that's one issue that's pretty much resolved that the CFTC is going to get for the first time authority over spot trading in derivatives. And I think that's a big thing. And that goes to your question, Steve. is to what's a big challenge for Mike. Mike will now need to develop a regulatory regime to the spot. What do we mean by the regulatory regime? We mean how do exchanges operate? What are their capital requirements? What are their operating requirements? What are their customer protection issues? How are their margin models set and monitored? What inspections does the CFTC do?

Or how do you register? All of those will need to be put in place. Now, the good news is, already in place for the derivative exchanges. And I'm quite certain it's because it's just logical. The CFTC is going to borrow from a lot of that regulatory structure to regulate spot markets. So I think it will be a load of work, but I don't think it's going to be an intellectual challenge for the CFTC because they have very good working models. Let's remember one thing. No CFTC exchange failed during the great financial crisis. The CFTC's models, been around for over 40 years, the agency's been around for over 40 years, and its structures and its models have been very, very durable through one crisis after another.

So I think it lends itself to putting a new structure, to using that as the basis for the structure for this new landscape. Just a quick follow-up to that, and I'm going to move to prediction markets, but a lot of like FCMs, DCMs, I mean, they're not these vertically integrated behemots that robotic changes are in crypto today. How does, like, I appreciate your point, but I know that Mike was also asked yesterday if these exchanges should stay vertically integrated custody, clearance, settlement, execution, all of it.

Do you think that is- Yeah. So, you know, there's philosophical differences, philosophical underpinnings to one's view. I'm one of those who believe that market structure should not be dictated for the convenience of regulators, but for the convenience of market consumers, right? It should be built around what does the market want, not what do the regulators want. And then the regulators need to apply their principles of customer protection, but the structure should be organic to the industry. The crypto industry, unlike, say, the ag industry, has grown up with an integrated model.

And I think it would be wrong. This is Chris John Carl's view. I don't want to put words in Mike Seleck's mouth, Chris John Carl's view, is I think it'd be wrong for regulators to say, no, no, no, no, we don't care what you've. done, you've got to do it the way we like it. And here's our market structure. I think that's just wrong. I think it's not American. I think our approach should be, okay, we accept that's the way you've evolved this market. Now, how do we work into that customer protection? How do we work into that the protection of customer accounts, which the CFTC has been brilliant at? Because I think,

as your audience know, the one piece of the Sam Benfankman FTX empire that didn't fail was the piece under CFTC supervision because the CFTC requires what we call segregation or protection of customer accounts. So I think my view is the CFTC should come at this and say, okay, we accept the way the marketplace has evolved, its market structure, but now we need to overlay that these principles of customer and market protection that have served us so well decade after a decade. So let's approach it from a customer account segregation, from

investor protection, investor education, et cetera, et cetera. Got it. Defi was also a big topic. I believe it was actually Chairman Blisman's second question. Democrat DeFi plans sort of through a wrench in market structure a few weeks back. And with a lot of these commodities trading on defy platforms, there are questions about how to

sort of balance the oversight versus innovation that that debate that's been going on for millennia. So how do you see, yeah, Mike? So I had a great day in Washington yesterday, not only had the honor to introduce Mike to the committee, but I actually met with a little over half a dozen senators, key senators on this from the banking committee to the Ag Committee. And I came away from that believing that the big issue in passage of the Clarity Act is the DFI piece. I think almost all the other issues had been addressed and resolved, and I think that's the one big piece. Now, what does the defy piece mean? It is what regulation should be applicable to participants in the decentralized

finance world, software developers, layer one developers, et cetera. And there is a difference there. The Democrats are rightfully focused on law enforcement and how do we be able to provide provisions against money laundering and all the bad things of illicit finance, I think their motives are good. I think they're going about it the wrong way. Their approach would be to impose upon developers in the defy sphere all the panoply of Bank Secrecy Act requirements for anti-lund. And basically, they're responsible for gathering financial information from participants. And I'm one of those who believe the Bank Secrecy Act is long overdue for a full revision. It's all focused on identity rather than activity. And I think the better approach of law enforcement should be we focus on activity

by allowing law enforcement to be nodes on blockchains, but allowing people to otherwise, operate anonymously. Republicans that I spoke to believe that we really, you know, don't want to impose Bank Secrecy Act obligations on deal. defy until we know what problem we're trying to solve. What is the public policy we're trying to achieve? And so I think there's a lot of efforts underway right now. The good news is, is there's a lot of conversations going on. Anybody that was in the room yesterday saw a lot of conversations between Cory Booker, who's become the point person on the Ag Committee, Democrat side to negotiate the Clarity Act. A lot of conversations going on with Chairman Bozeman over this. And

and other centers they spoke to referred to the high level of conversations. You know, at the end of the day, politicians are anticipating that crypto is going to be as active in the next November's elections as they were a year ago. And they've got to deliver. I think both sides of the aisle, despite their differences on many things, really feel the pressure to deliver on crypto. And so I think there is a good faith effort on both sides of the aisle to come together. And I think they've actually addressed most of the issues in the Clarity Act, with the exception of DFI. I think DFI is the hard one.

But there's a lot of efforts to try to get that. As they say, I think there's some philosophical differences to what do we do about DFI and whether it's even ripe for addressing or whether it's even the right area to go about tackling illicit finance. But that will remain to be seen. That's going to be a hard one. But I think with the effort that's underway, it is doable. And I'm cautiously optimistic a bill may get done in the first quarter of next year. Got it. Okay.

Two more questions, and then we'll wrap up. One, this did not come up in the hearing, but I'm just interested if you have any sense of Mike's thoughts on PURPS, especially now that they're really coming onshore here in the U.S. with the potential for explosive growth. You know, I don't know Mike's views on this. And even if I had an inkling, it would be inappropriate for me to put my, try to speak for him. Fair enough. Then as a former. Of course, of course. What I would say about perps is that the CFTC has a pretty, you know, well-engrained set of rules. The fact of the matter is perps are not illegal under CFTC law. They just need to trade on a fully licensed exchange when in CFTC parlance is called a designated contract market or a DCM. And the CFTC and the self-regulator, which may be that DCM and maybe the National Future Association, have a role to play in setting the margin model. And so it's not like there's new law that needs to be created for perps in the United States.

The law is actually in place. It's full registration as a full exchange, a CFTC exchange, with margin models that have to be approved, reviewed by the agency. And, of course, clearing services through a licensed clearinghouse. So I don't think perps are a foreign idea or a foreign concept or impermissible. The regulatory burden is high. So any chairman, whether it's Mike Seleague or others, doesn't walk in and say, oh, I want to do this with regard to perps, they walk in and say the law is pretty much already baked, here are the rules, follow the rules, and we can get this done, we can get going.

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but that was another big focus of discussion, in particular whether or not like CFDC laws, preempt state laws, particularly when it comes. to the sports betting or gambling. I just want to know if you have any quick thoughts on that. And then I'd love to just get your very brief outlook on what might happen next. It looks like the candidacy might move out of committee today and move to the full vote in the Senate, perhaps as early as next week. Yeah, I'll answer the last question first. I think it's looking.

I know Mike Selegg's confirmation is a priority for the White House. They've communicated that to House and Senate leadership. So I think Mike will have a vote on him out of committee, I think, in the next 24 hours. And I look to him to actually have a floor vote before Christmas. I think Mike could be in the seat and get rolling before the year end. On prediction markets, I'm a huge fan. As you know, I've been an advisor to Shane Copeland and Polly Market. I believe prediction markets are.

a huge initial application of digital assets and stable coins that are going to have a lasting impact. I often ask audiences who checked the weather report before leaving the house today. And it's always the same. It's about four-fifths of the people in the audience raised their hands. And I say, look, you know it's going to be 10% wrong and 90% right. But it gives you predictability. You're going to put on a rain code if it says rain.

and and and and and and and and and and and and and and and and and and and and and and and and and and and and and variables. There's a lot of there's there's there's very little predictability. Will the shutdown last another week so that I maybe put off that trip to Chicago because I may not get there on my flight? Will there be one or two, um, a fed rate decreases so that I remorgate, think about remorgeting my home? Who will win that next election because I've got energy stocks. Maybe I want to sell out of them, depending on who wins the next election.

Or do I want to move out in New York City if there's going to be a different set of policies under a new mayor? People like predictability. And polls don't give you predictability. They give you biases. And that's why they have these margins of error. And there's not, I'm not ragging on polling. I know it's a science that's been refined over the years. But there lacks incentives.

What makes prediction markets so accurate and how accurate? In 2024, when more humans went to the polls than ever before in human history, it was accurate in every poll in the world, from France to Japan to Britain, everywhere else, including the United States. People like predictability, and they like actually saying, I have concern about this. What do others think, which is what prediction markets do? And so I think prediction markets are tremendous application. I think their time has come. Now, what does that mean? Well, a lot like Uber, which came up with an application for the Internet, a great application in terms of ride sharing, it ran into a regulatory maze that was put together under the analog world of taxi and limousine commissions in cities and states, every one of them having different structures and different monopolies. And it had to break through that almost item by item. I think the path for prediction markets isn't much the same way. You've got state gambling laws, you've got casinos, you've got others, all of which have vested interest in the status quo.

And I think this is going to take time. So I think Mike was quite right. The courts have a role to play in this. Congress has a role to play in this. And for now, the landscape is less than crystal clear. Nobody can say definitively, what is the role of states and federal? My personal view, again, this is not Mike Sealing. Chris John Carlo, is that what will emerge from this will be in the narrower set of local gambling

interests. There'll be a role for state regulation. In the much broader set of prediction markets on elections, on interest rates, on corporate earnings, on things like that, that has to be done at the federal level. And I think you'll see some shared responsibility. By the way, we do that in our banking system right now. You've got bank regulators and federal regulators. We do that in the securities world. You want to offer securities to New York residents. You've got to go through both the Securities Exchange Commission

and New York Department of Financial Services. So I think you're going to have some shared responsibility where the state has a legitimate local interest in gambling, paulers, and track racing. But in the broader area of events contracts, beyond that, I think you're going to see an exclusive federal jurisdiction. But I think that's going to take years to, evolve in the same way that Uber took years to. And what will make it, though, go is that this

innovation is something that people want. I think people love prediction markets, and I think that's only going to grow, especially with a younger generation coming into prominence. I think prediction markets are one of the huge new business models of the future. Yeah, absolutely. Well, Chris, thank you so much for the time and sharing the reflections on what happened yesterday in D.C. Thanks to everybody watching. and listening. Thank you again, Chris. Great to see you, Steve.