Background

New Commodity Futures Trading Commission (CFTC) Director of Enforcement David I. Miller made several significant announcements in remarks at NYU Law School on March 31. Miller discussed what the CFTC Division of Enforcement (the Division) will prioritize during his term, drew attention to reported misconduct in prediction markets, and outlined upcoming changes to the Division’s staff advisory on cooperation.1 The advisory will include a declination policy under which eligible parties that self-report, fully cooperate, and fully remediate will receive “a clear path to a declination … absent aggravating circumstances.” He also echoed Chairman Michael Selig’s welcome “regulation by enforcement is over” talking point. Miller framed the Division’s priorities as reflecting its “core mission: protecting market integrity by targeting fraud, abuse, and manipulation” and announced that the Division will be hiring additional staff to pursue them.

The Division’s Five Priorities

  1. Insider trading: Miller stressed that–contrary to views apparently being circulated in various fora by uninformed individuals–the CFTC has the authority to punish insider trading in prediction markets and other markets the CFTC regulates. He emphasized that the CFTC intends to actively pursue cases involving the misappropriation of material nonpublic information (MNPI), specifically where individuals trade on or “tip” information in violation of a duty to the source of the information. He added that “those who hold MNPI are often subject to a web of legal and confidential obligations.” Miller added that multiple sources of authority already prohibit government employees from insider trading and warned that this is “another potential area of prosecution[.]”

    In contrast, Miller highlighted areas on which the CFTC will not focus: “trivial” cases, “cases where there is no clear breach of duty[,]” and cases in which persons trade based on information they rightfully own (e.g., a farmer using a futures contract to hedge crop prices). Although it seems from those remarks that small-time insider traders may get a pass, the CFTC will look to the exchanges to detect and punish those cases, as it does today in many subject areas. The CFTC’s future avoidance of cases with “no clear breach of duty” is perhaps inspired by a desire not to regulate by enforcement and means that the private bar may need to bring cutting-edge manipulation cases under Commodity Exchange Act (CEA) Section 22 if there is to be redress.
  1. Market manipulation: Market manipulation was a focus of enforcement efforts under former Acting Chair Caroline Pham and has been a long-standing CFTC enforcement focus. Miller stated that this will continue to be an area of focus during his tenure and that the Division will focus on energy market manipulation given that it has certain features that make manipulation especially damaging (e.g., inelastic demand, limited substitutability, high storage costs, storage limitations).

  2. Market abuse: Miller made clear that the focus on manipulation would not be to the exclusion of other misconduct, including spoofing, disruptive closing period trading, and wash trading. He underscored the focus on this area by ominously stating “[w]e are watching and will take action when necessary.”

  3. Retail fraud: This too was a focus of enforcement efforts under Pham and has always been a key CFTC enforcement area. Although Pham had focused enforcement mostly on manipulation and fraud cases, Miller has expanded the scope of the Division’s focus to include a few other categories.

  4. Willful anti-money laundering/know your customer violations: Here, the CFTC will be targeting intentional noncompliance rather than technical errors. It will also initiate criminal referrals to the Department of Justice “as appropriate.”

Insider Trading in Prediction Markets

In his remarks, Miller pushed back on what he characterized as the “myth” that insider trading laws do not apply to prediction markets, noting that–although their character as such is subject to litigation–the CFTC views event contracts as swaps,2 making swap-related activity subject to the CEA’s and CFTC’s anti-fraud provisions. He highlighted that prediction markets are the “first line[] of defense” in stopping insider trading, noting that the CFTC’s recent advisory on prediction markets suggests some of the steps prediction markets can take regarding these contracts (e.g., considering whether contracts have a heightened risk of manipulation before listing them, using sports leagues’ lists of individuals who should not trade because they have MNPI). He also warned that exchanges “need to do their jobs” and cautioned that the Division will be active in this area. He flagged prediction market contracts based on the actions of individuals or small groups–such as sports injury contracts–as presenting heightened risk and highlighted the CFTC’s recent memorandum of understanding (MOU) with Major League Baseball as a model for information-sharing. He also warned that government employees who trade on MNPI may face prosecution under both the anti-fraud provisions of the CEA and the “Eddie Murphy Rule” under Section 4c(a)(4).

New Cooperation Policy

Miller announced an upcoming staff advisory on cooperation, highlighting several differences from past policies:

  • Declinations: Parties who self-report, cooperate fully, and remediate entirely can receive a clear path to a declination barring aggravating circumstances (e.g., pervasive intentional or reckless conduct by ownership or senior-most management, recidivism involving intentional or reckless conduct).
  • Self-reporting: Firms will be eligible for declination if they self-report in a prompt, timely, and good faith manner, even where the party needs more time to investigate. Declination will be accessible even if the CFTC already knew about the conduct at issue, provided the information is not yet public and no imminent disclosure is expected.
  • Binary cooperation: Full cooperation is required. Miller emphasized that partial cooperation would forfeit the declination path. Full cooperation includes:
    • Disclosing all relevant non-privileged information
    • Sharing internal investigation findings without breaching privilege or work-product protections
    • Making personnel available for interviews
    • Preserving all records, including ephemeral messages
    • Undertaking good faith efforts to secure documents located overseas
    • Continuing to report
  • Remediation: In addition to the reporting, firms should actively take steps to compensate victims and address compliance deficiencies. Addressing compliance deficiencies also includes, where appropriate, disciplining relevant employees, including both those responsible for the conduct and those with supervisory authority.

Potential Industry Implications

These remarks, read alongside the CFTC’s recent advanced notice of proposed rulemaking, its staff advisory on prediction markets, recent enforcement actions, and its lawsuits against states seeking exclusive authority to regulate these markets, suggest a comprehensive shift in policy from previous administrations. Prediction market platforms should expect heightened scrutiny of surveillance, compliance, and contract design, consistent with the Division of Market Oversight’s staff advisory’s expectations, and increase their engagement with sports leagues and integrity bodies regarding restricted participant lists and information-sharing arrangements, with the MLB MOU serving as a template. Energy market participants should review compliance programs considering the Division’s stated focus on energy market manipulation. All market participants should evaluate the forthcoming cooperation policy as an opportunity to review self-reporting protocols, ensure records preservation extends to ephemeral messages, and mitigate enforcement risk.

If you are a market participant, an exchange, or a registrant that may be affected by these enforcement priorities, reach out to your regular contact to discuss compliance positioning, internal investigation protocols, and cooperation strategy.

1 Miller announced that the Division will rescind the previous, Pham-era advisory on the issue. See CFTC Division of Enforcement Advisory on Self-Reporting, Cooperation, and Remediation; Rel. No 9054-25, (Feb. 25, 2025).
2 The CFTC underscored this point in its recent lawsuits against the states of Connecticut, Arizona, and Illinois.