Author: CoinDesk

Translated by: Deep Tide TechFlow

Deep Tide Overview: Against the backdrop of the Trump administration's cuts to federal staff, CFTC not only did not slow down after slashing 20% of its employees but instead embraced AI tools for registration approvals and trading monitoring. This means that the compliance processes for cryptocurrency companies in the U.S. may be quicker and stricter—machines will directly reject unqualified submissions but can also flag issues more rapidly. For projects looking to enter the U.S. market, automated approvals present both opportunities and challenges.

The Commodity Futures Trading Commission (CFTC) is turning to artificial intelligence to fill the staffing gaps after cutting more than one-fifth of its workforce, Chairman Mike Selig said in an interview with CoinDesk.

Selig plans to attend the Consensus 2026 conference in Miami next week. He stated that AI and automation could compensate for the staff reductions under President Trump's plan to downsize federal personnel. He mentioned that this agency, set to become the primary regulator in the U.S. cryptocurrency industry, is pushing to utilize this technology to review registration applications and even assist in market monitoring.

The CFTC's registration process currently relies on manually submitted documents, Selig noted, "So we are building systems to automate and make the process more efficient." "AI tools can be used to review applications, flag certain matters for staff, making their work easier, speeding up their feedback, and even rejecting some substantively incomplete submissions," he explained. "We can see submitted materials that have blanks, insufficient descriptions, or obvious errors; AI can identify these and either reject those applications or move them to the back of the queue."

Selig mentioned that his staff is currently being trained on using Microsoft Copilot for the first time, but the agency is also developing some "internal" tools for reviewing swap data and market monitoring. "We now have tools that help us draw conclusions on certain trades, etc. So we are embracing technology."

The chairman has been at the helm of the U.S. derivatives regulatory agency for four months, and the agency has already jumped into the competition for emerging technologies, including the regulation of cryptocurrencies and prediction markets.

Classification of Crypto Assets

Even though Congress has yet to pass new cryptocurrency laws, one of Selig's key initiatives is to accept regulation of the industry. To this end, he said the most significant action taken so far has been the joint issuance of guidelines with the Securities and Exchange Commission (SEC) to create a "classification system" for digital assets—a defining system that explains how each subset of cryptocurrency will fit within the scope of regulatory jurisdiction.

"This is a significant advancement that will allow market participants, software developers, and consumers to use cryptocurrency systems and crypto assets with confidence, without worrying about violating securities laws," he said, though this explanatory guidance has not yet fully attained the power of permanent policy. "Now we have clarity," he stated. "We understand what the CFTC's responsibilities are, and we will take action to combat fraud, manipulation, and insider trading in the cryptocurrency market, which we believe will have a tremendous impact, additionally providing clarity for consumers and users of this asset class."

Prediction Markets

However, his exploration in the realm of prediction markets—which involves companies like Kalshi, Polymarket, Crypto.com, Coinbase, and Gemini—has been the most directly controversial. Selig insists that the CFTC is the only relevant regulator for these companies, which has put him at odds with various states that have accused these companies of violating state gambling laws—particularly in the realm of sports betting. He has sued multiple states, most recently including New York, to defend the agency's "exclusive jurisdiction."

Last week, the CFTC joined the Department of Justice in a lawsuit against a U.S. Army Special Forces soldier accused of placing prediction market bets in connection with a military operation he participated in against Venezuela. Sergeant Gannon Ken Van Dyke, an elite forces Green Beret, was arrested and charged with using confidential government information and fraud, along with the CFTC's lawsuit against him for insider trading.

"We are paying attention and continuing to monitor the news," Selig said regarding his agency's enforcement stance on prediction markets. "We will take action against bad actors in our markets; we take this matter very seriously. This is not just talk; market participants should be vigilant."