The U.S. Commodity Futures Trading Commission is expanding its use of artificial intelligence and automated surveillance tools to oversee digital asset markets, prediction platforms, and traditional commodities derivatives, according to testimony delivered by Chairman Michael Selig before the House Agriculture Committee. The hearing placed the agency under sharp congressional scrutiny as lawmakers questioned whether the CFTC can adequately police fast-moving markets while operating with a significantly smaller workforce.
Selig said the commission has authorized staff use of Microsoft 365 Copilot and is developing AI-based surveillance systems designed to identify fraud, market manipulation, and insider trading. His remarks came as members of Congress raised concerns about suspicious trading patterns on platforms such as Polymarket and Kalshi, as well as broader questions about crypto market oversight, event contracts, and the need for clear federal legislation.
AI tools emerge as a force multiplier for a leaner agency
One of the most closely watched aspects of the hearing was the CFTC’s staffing position. Selig told lawmakers that the agency’s headcount has fallen from 708 full-time employees at the end of fiscal year 2024 to roughly 543, representing a reduction of more than 20%. He defended the cuts, arguing that the commission is functioning more efficiently than ever and that technology is helping offset resource constraints.
That argument drew pushback from lawmakers. Representative Angie Craig of Minnesota said the CFTC cannot be expected to properly oversee digital commodities trading and prediction markets with fewer personnel than had previously been requested under earlier administrations. She also emphasized that Congress did not intend for the CFTC to be led indefinitely by a single commissioner. At present, Selig is the agency’s only sitting commissioner, with four seats still vacant, leaving the regulator in a structurally unusual and politically sensitive position.
Against that backdrop, the CFTC’s embrace of AI appears less like a modernization experiment and more like an operational necessity. By incorporating productivity and monitoring tools from Microsoft while building internal surveillance systems, the agency is signaling that it wants to preserve enforcement capacity even as staffing and governance constraints persist.
Lawmakers press CFTC over suspicious Polymarket and Kalshi activity
The hearing’s most politically charged exchanges centered on potentially suspicious trading tied to sensitive geopolitical events. Members of Congress repeatedly questioned whether prediction markets and adjacent trading venues may have reflected insider knowledge of government actions before those actions became public.
Representative Jim McGovern of Massachusetts pointed to approximately $500 million in oil futures and equities positions reportedly placed shortly before President Donald Trump posted on Truth Social at 7:04 a.m. on March 23 that the United States had begun ceasefire talks with Iran. Other lawmakers, including Representative April McClain Delaney, cited a Reuters report alleging that six newly created Polymarket accounts earned around $1.2 million by betting on U.S. airstrikes against Iran. According to that report, those accounts were funded within the 24 hours preceding the attacks.
Those details intensified congressional concern that prediction markets may be vulnerable to informed trading around military and diplomatic developments. The issue is especially sensitive because event contracts can rapidly aggregate sentiment, rumor, and potentially privileged knowledge into tradable prices that are visible to the public in real time.
Selig maintained a zero-tolerance stance on insider trading throughout the hearing but declined to confirm or deny whether the commission is investigating any specific transactions. He said discussing particular matters could jeopardize ongoing enforcement work. He added that the agency’s enforcement division, led by David Miller, a former CIA officer and former prosecutor in the Southern District of New York, is actively strengthening its staffing.
CLARITY Act framed as critical to ending crypto regulatory ambiguity
Beyond the immediate controversy over prediction market trading, Selig used the hearing to urge Congress to move forward with bipartisan crypto market-structure legislation. He described the CLARITY Act as essential to resolving years of uncertainty that, in his view, have pushed developers and innovators offshore.
According to Selig, the CFTC and the Securities and Exchange Commission have already signed a joint interpretation clarifying which crypto assets should be treated as securities and which should be treated as commodities. He also said the two agencies have entered into a memorandum of understanding to coordinate surveillance, information sharing, and rulemaking. That interagency cooperation is notable because the line between SEC and CFTC jurisdiction has long been one of the most contested issues in U.S. crypto regulation.
Selig’s message to lawmakers was straightforward: agency guidance can help in the short term, but durable regulatory certainty requires legislation. In his telling, only Congress can establish a lasting framework that will survive future administrative shifts and give market participants confidence about how digital assets will be regulated in the United States.
Prediction market rules remain unsettled
Prediction markets received sustained attention during the hearing. Selig noted that in March 2025, the CFTC issued an advance notice of proposed rulemaking seeking public comment on how event contracts traded on registered exchanges should be regulated. These contracts have become increasingly controversial as platforms expand beyond classic economic and political questions into areas that may intersect with public policy, national security, and state gambling regimes.
Selig said the CFTC has not allowed contracts tied to war, terrorism, or assassination on its regulated platforms, but he stopped short of prejudging the ultimate outcome of the rulemaking process. That measured response reflected the difficult balance the agency is trying to strike: it wants to preserve a formal regulatory process while facing rising political pressure over what kinds of event contracts should be permitted at all.
Several Democrats argued that sports-related prediction contracts could directly undermine tribal gaming compacts and state sovereignty. Their objections underscored how event markets are no longer just a financial innovation issue but also a jurisdictional and political one, with implications stretching into gaming law and federal-state relations.
DEX activity, stablecoins, and tokenized collateral also under review
The hearing also touched on offshore and decentralized trading venues. Representative Austin Scott of Georgia raised concerns about decentralized exchanges such as Hyperliquid listing crude oil perpetuals without segregated funds, market surveillance, or U.S. oversight. He said those venues can process as many as 200,000 orders per second and warned that such activity could potentially influence domestic gasoline prices.
Selig responded that the CFTC is monitoring those extraterritorial markets and wants to bring such activity back within domestic regulatory reach. While he did not outline a specific enforcement roadmap, his comments suggested that the agency sees offshore decentralized derivatives markets as more than a niche crypto issue. Instead, it views them as part of a broader challenge to the effectiveness of U.S. commodities regulation.
He also told the committee that the commission has taken steps to clarify the capital treatment of payment stablecoins, issue guidance on tokenized collateral, and outline obligations for U.S.-based software developers working on blockchain infrastructure. These remarks indicate that the CFTC is attempting to address not only trading venues, but also the supporting architecture around digital finance.
Leadership gaps and legislative urgency remain central concerns
The hearing ended with a reminder that the CFTC’s policy agenda is unfolding under unusual institutional strain. In addition to headcount reductions, the agency continues to operate with just one sitting commissioner. Committee Chairman GT Thompson said he and Angie Craig will send a letter to the White House urging the rapid nomination of qualified individuals to fill the four vacant commissioner seats on a bipartisan basis.
That closing note highlighted the central tension running through the entire session. The CFTC is trying to modernize with AI, expand surveillance, coordinate with the SEC, and respond to fast-evolving crypto and prediction markets. Yet it is doing so while short-staffed, partially vacant at the leadership level, and still waiting for Congress to settle core questions about market structure and regulatory authority.
For the digital asset sector, the significance of the hearing lies in that combination of technology, enforcement, and legislation. The CFTC is not only experimenting with new tools such as Microsoft-enabled AI systems; it is also making the case that technology alone cannot substitute for a clear statutory framework. As scrutiny intensifies around insider trading risks, event contracts, offshore derivatives, and stablecoin-related policy, the next phase of U.S. crypto oversight may depend as much on congressional action as on the regulator’s surveillance capabilities.