A hearing for who will lead the Commodity Futures Trading Commission (CFTC) failed to provide clarity about how sports event contracts will be regulated under his leadership.
CFTC Chair nominee Michael Selig met with the U.S. Senate Committee on Agriculture, Nutrition, and Forestry on Wednesday for a hearing about his potential role as leader of the CFTC. Selig, the current Chief Counsel for the SEC’s Crypto Task Force, was nominated by President Donald Trump to lead the CFTC after Brian Quintenz‘s nomination was rescinded.
On Thursday, the committee voted 12-11 to advance Selig’s nomination for a full Senate vote, with Republican members in favor and Democrats opposed.
Selig did not provide direct answers to direct questions
In Wednesday’s hearing, the committee repeatedly tried to get a direct answer from Selig on how he would handle sports-related event contracts if placed in the post, but he repeatedly deferred to the courts on the matter.
“I intend to always adhere to the law and follow what judicial decisions tell me to follow,” said Selig when asked about the enforcement of event contracts. “I also believe that these types of issues are ones we can work through together. Some of them are Congressional issues, as to whether we change statutes in certain areas. These are just very challenging, interpretive questions I will look to the courts on.”
Selig plans to use the courts as a reference to handle the legality and regulation of sports event contracts, with the offerings at the center of legal disputes in several U.S. markets.
There are currently active court cases in nine different courts questioning whether or not these sports contracts run afoul of state or tribal gaming regulation, with split decisions so far regarding preliminary injunctions to keep financial firms online in the state while the cases move forward.
Senator wants clarity on what is sports betting
Senate committee members addressed how gambling related to sports event contracts.
“Let me just ask, maybe even break it down more simply. If you and I bet on who wins the Bills game tomorrow, would you consider that gambling?” California Sen. Adam Schiff asked Selig.
The CFTC Chair nominee once again deflected, saying he would look to the courts for guidance on the issue. Schiff iterated that sports event contracts resemble gambling and asked Selig about what he actually considers to be sports gaming.
“Many lengthy legal opinions have been written on one word in a statute and I would really want the benefit of understanding what the judges think about the issue,” said Selig. “This could be one that works its way all the way up to the top, so I will look to the courts on the issue.”
Quintenz was more candid during nomination process
Selig took a different approach when discussing event contracts compared to Quintenz, who tipped his hand a little more regarding how he would interpret regulations on event contracts.
“I believe the law is very clear about the purpose of derivative contracts and about events that have financial or economic consequences qualifying as commodities,” said Quintenz during his hearing in June when referring to the CEA.
Quintenz never received a formal vote for his nomination by the Senate committee. His nomination stalled after key stakeholders reportedly urged Trump to reconsider his vote.
Lawmakers voice integrity concerns to Selig
Recent gambling-related controversies were also discussed during Selig’s hearing, and New Jersey Sen. Cory Booker voiced concerns about protecting the integrity of sports.
“I want to make sure that you have strong integrity in your monitoring systems in place to ensure athletes, coaches, league employees and referees or any close family or friends or such individuals are not manipulating America’s past time. . .,” said Booker.
The Senator raised integrity concerns after two Cleveland Guardians pitchers were charged with wire fraud conspiracy and other charges for allegedly rigging pitches during games and receiving kickbacks. The NBA is also dealing with a gambling controversy after a current coach and former player were indicted for alleged ties to a Mafia-backed, rigged poker game. An active player, Terry Rozier, also allegedly manipulated his own gameplay.
Selig once again referred to the courts when asked about the integrity concerns.
“I think it’s vitally important that the CFTC look to the courts on a lot of these issues,” added Selig. “Of course, it’s vital that the CFTC ensure that those contracts are not being manipulated, that they’re not really susceptible to manipulation. It’s core principle.”
CFTC’s dwindling numbers cause for concern
The CFTC is typically comprised of one chair and four commissioners but the agency has recently been under the sole leadership of Acting Chair Caroline Pham.
“I don’t know why it’s hard to say we need more staff, or we need strong staff and we need the investment,” said New Mexico Sen. Ben Ray Luján during the hearing. “This is a whole new space that we’re building in the United States of America and I think you find bipartisan support.”
The CFTC is short-handed, as the agency placed staff on administrative leave in May for “potential violations of laws, government ethics requirements and professional rules of conduct.” That same month, commissioners Summer Mersinger, Kristin Johnson and Christy Goldsmith Romero announced they were stepping down from their roles after the departure of chairman Rostin Behnam earlier this year. The agency also underwent a round of job cuts, parting ways with roughly 4% of its workforce of around 630 employees.
“The CFTC has a critical mission to protect these markets, to safeguard investors and I will see that that is carried out, whether we need more resources or not,” continued Selig. “Once confirmed, I’ll make that assessment. But I really think it would be irresponsible for me to prejudge that issue.”
