Departing Commissioner Urges CFTC to Protect Consumers and Ensure Market Stability

In a farewell address, Commissioner Johnson weighed-in on emerging regulatory issues and highlighted how past crises demonstrate the costs of weak governance, inadequate compliance, and poor risk management. 

In remarks before the Brookings Institution, Ms. Johnson emphasized that consumer protection and market stability must anchor financial regulation as markets evolve. Drawing parallels between the 2008 financial crisis and the recent crypto collapses, she argued that failing to prioritize consumer protection and market stability, in the pursuit of innovation, leads to devastating consequences. She said that guardrails, such as segregation of customer funds, strong internal controls, and recovery planning, are essential to protecting investors and preserving confidence in the financial system.

Ms. Johnson expressed disappointment over the growth of prediction markets, particularly those targeting retail investors. She decried the lack of a final rule to address political event contracts; too few guardrails and too little visibility" into the market landscape; and the trend of firms obtaining licenses for one purpose and then pivoting to offer prediction contracts or auctioning off their licenses ("rent or buy my license"). She urged the Commission to establish clear regulatory expectations for these products.

On AI, Ms. Johnson said that while it can enhance surveillance and compliance, it can introduce new vulnerabilities, including cyber threats, fraud, and dependence on a small number of service providers. She called on U.S. regulators to harmonize oversight, improve information sharing, and strengthen resilience frameworks.

Acknowledging CFTC staff, she said that resilient regulation depends as much on the people who build and enforce it as on the policies themselves.