On Thursday, crypto and prediction markets dominated senators’ grilling of Michael Selig, US President Donald Trump’s pick to lead the Commodity Futures Trading Commission.

While Selig dodged repeated questions from senators — most of them Democrats — over prediction markets and a staffing shortfall at the agency, he also said it’s “critical” that the government pass substantial crypto laws.

“We have so many entrepreneurs and builders and developers that have been pushed offshore, and this is due to the lack of clarity,” he said.

The hearing comes amid negotiations over a crypto market structure bill that could massively expand the CFTC’s remit.

Traditionally a regulator of agricultural products such as wheat futures, the CFTC would become the primary regulator of crypto markets according to a draft bill released earlier this month.

Crypto ally

Selig is chief counsel at the Securities and Exchange Commission’s Crypto Task Force and an advisor to SEC Chairman Paul Atkins.

A former partner at corporate law firm Willkie Farr & Gallagher, Selig has been a vocal supporter of the crypto industry for years. He often decried former SEC Chair Gary Gensler’s approach to crypto as “regulation by enforcement.”

Since Trump nominated him in October, the crypto industry has closed ranks behind Selig, with the Crypto Council for Innovation backing him in a letter sent to senators on the Agriculture Committee earlier this week.

During his hearing, Selig hinted that he’d take a light-touch approach in regulating decentralised finance, or DeFi.

“We should be looking to onchain markets and onchain applications and thinking about the features of these applications, as well as whether there’s an actual intermediary involved, where we have some operator, administrator,” he said.

“In many cases, that may not be. And so we have to think about the best approach.”

Prediction markets

Selig spent a chunk of the hearing dodging questions about whether the CFTC has purview over prediction markets, saying he’d defer to the courts.

His answers seemingly frustrated the American Gaming Association, which represents casino operators in the US who are fighting tooth and nail to keep prediction markets out of their territories.

Prediction markets, on their part, have fired off a barrage of lawsuits against states that have banned them or require licenses for gambling platforms, arguing their product — event contracts — are distinct from wagering.

Deferring to the courts risks putting the question in a legal limbo for years and would “leave consumers at risk in the interim,” the American Gaming Association said in a statement against Selig after Thursday’s hearing.

“The American Gaming Association will continue to defend the longstanding sovereignty of states and tribes to regulate gaming, and work with Congress to ensure the CFTC prevents gambling masquerading as financial products.”

CFTC manpower

The lack of manpower at the CFTC proved another flashpoint during the hearing.

The regulator has been short-staffed for months. While it typically features one chair and four commissioners — two Republicans and two Democrats — it has been led single-handedly on an interim basis by Caroline Pham since September 3.

Additionally, senators said they feared the agency would not have the staff it needed to handle a dramatic increase in its responsibilities. While the SEC has some 5,000 full-time staff, the CFTC has only 600.

Asked to commit to advocating for a full, five-member board, Selig said only that he valued having a “diversity of viewpoints.”

He also declined to say whether the agency needed more staff, saying he would not know until after he was confirmed.

His answers frustrated Democrats on the Senate’s Agriculture Committee.

“I don’t know why it’s so hard to say we need more staff,” Senator Ben Ray Lujan, a Democrat from New Mexico, said.

The concern is among the few that cuts across party lines.

“The committee as a whole is with you 100% regarding having adequate funding,” committee Chair John Boozman, a Republican from Arkansas, told a Democrat colleague. “We’ve been talking to the administration about that, how important it is.”

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.