CFTC Commissioner Johnson Reiterates Support for Regulatory "Interventions" on AI

CFTC Commissioner Kristin N. Johnson reiterated her support for regulatory actions that foster responsible use of AI in financial markets.

At a conference on AI at New York University, Ms. Johnson reported that the Market Risk Advisory Committee ("MRAC") adopted a working plan for advancing the CFTC’s oversight of market integration of AI. (See previous coverage.) She added that the MRAC is considering (i) conducting a survey on the use of AI in CFTC-regulated markets and (ii) advancing recommendations on "new guidance, advisories or formal rulemakings, based on how CFTC market participants are using AI to conduct regulated activities..."

Ms. Johnson warned that AI may "introduce unprecedented risks concerning market integrity, customer protection, governance, data privacy, bias, and cyber threats." She said she supported the following regulatory "interventions [that] foster responsible use of AI in financial markets...":

• the expansion of the CFTC annual systems examination questionnaire to incorporate questions about the adoption of AI and related risks;
• the ongoing development of a principles-based framework; (Ms. Johnson said she anticipates "exploring a principles-based regulatory framework that underscores intelligibility, risk management, compliance, oversight, market responsibility, notice, and explainability;")
• heightened penalties for those who intentionally use AI to engage in fraud, market manipulation or regulation evasion;
• the creation of an inter-agency task force to share information; and
• the development of guidelines, tools, benchmarks and best practices for the use and regulation of AI in the financial services industry (aligned with the efforts of the AI Safety Institute.)