On the Hot Seat: Brian Quintenz Faces Senate Spotlight in CFTC Confirmation Hearing

Brian Quintenz appeared before the Senate Committee on Agriculture, Nutrition, & Forestry (Senate Ag Committee) for his June 10th nomination hearing for Commodity Futures Trading Commission (CFTC or Commission) Chairman. Committee members questioned Mr. Quintenz on a range of topics, including the regulation of digital assets, event contracts and prediction markets, the Commission’s approach to innovation and technology, and resource allocation. Largely reaffirming the principles that guided his prior tenure as a commissioner, Mr. Quintenz emphasized his commitment to promoting responsible innovation while protecting investors, supporting a technology-forward approach to all aspects of the Commission’s functions, and preserving the CFTC’s role as a principles-based regulator. For a discussion of Mr. Quintenz’s previous term and policy views, see this Katten post.

The major themes from the hearing are outlined below:

The CFTC’s Role in the Regulation of Digital Assets. Mr. Quintenz reaffirmed that the CFTC is the appropriate regulator for digital commodities and called upon Congress to provide clear statutory authority to oversee spot digital commodity markets. He expressed concern over past regulatory actions that have resulted in the debanking of crypto-related firms, noting that such actions have stifled innovation by restricting access to essential banking services. Additionally, Mr. Quintenz called for greater jurisdictional clarity, referencing inconsistent determinations by the Securities and Exchange Commission (SEC) on which crypto products are securities as making it difficult for market participants to comply with applicable laws. He articulated that regulatory clarity on digital assets does not preclude robust enforcement against fraud and misconduct by bad actors.

CEA Supports CFTC Jurisdiction Over Event Contracts. Responding to questions on the regulatory implications of event contracts, Mr. Quintenz stated that the Commodity Exchange Act (CEA) permits contracts based on events “associated with a potential financial, economic, or commercial consequence,” as such events create price risks similar to those in traditional commodity markets.[1] Addressing some senators’ concerns related to gaming laws and Tribal sovereignty, he committed to convening a stakeholder roundtable to ensure diverse viewpoints and industry stakeholders are heard. He acknowledged the ambiguity between the statutory framework of CEA section 5c(c)(5)(C) and the regulatory framework of CFTC Regulation 40.11 where the statute grants the Commission the power to determine that an event contract is contrary to the public interest and disallow it, without clearly defining what “the public interest” entails.[2]

Vision for Innovation and a Technology-First Approach. Mr. Quintenz highlighted the CFTC’s existing use of advanced technology for surveillance and oversight, committing to continue this trajectory and find new uses for state-of-the-art tools to enhance the agency’s efficiency. He stressed the importance of technology in safeguarding the integrity of systemically important clearinghouses.

A Time and a Place for 24/7 Trading. On market structure and 24/7 trading hours, Mr. Quintenz acknowledged that these innovations may be appropriate for some markets more so than others, citing the importance of understanding end users' liquidity needs and preferences, especially those in the agricultural community. He noted the importance of ascertaining the views of risk managers and hedgers.

The Statutory Mandate, Bipartisanship and Governance. Reflecting on his prior tenure as commissioner, Mr. Quintenz noted that the Commission has, at multiple times, functioned with as few as two confirmed commissioners. He pledged to preserve the Commission’s bipartisan nature and emphasized the value of public feedback in shaping rulemakings, particularly when the Commission is operating with a limited number of commissioners.

Deploying Agency Resources and Fair Competition. Mr. Quintenz supported increasing the CFTC’s budget and staff if new authorities over spot digital markets were granted, beyond the current enforcement authority over fraud and market manipulation. He also addressed concerns about delays in application reviews, stressing the need for timely and transparent processing. He welcomed the idea suggested by several Senate Ag Committee members of internal performance metrics to improve responsiveness and shrink timelines in registrant applications or product offering reviews.

Conflicts of Interest and Recusal from Certain Matters. Addressing potential conflicts stemming from his private sector experience, Mr. Quintenz committed to full compliance with all applicable ethics rules. He indicated that he would recuse himself from matters as appropriate. Moreover, he noted that an in-house staff member will review matters to ensure that his impartiality is maintained.

Next Steps in the Confirmation Process and Commission Status

Senate Ag Committee Chairman John Boozman is expected to schedule a meeting to vote on advancing Mr. Quintenz’s nomination. If approved, the nomination will be placed on the Senate Executive Calendar for a full Senate vote. Then, a simple majority is required for confirmation. This entire process may take as little as a few weeks or as long as several months to complete. The Commission currently has two members, Acting Chairman Caroline Pham and Commissioner Kristin Johnson, whose term has expired, but may presumably remain in office through the August congressional recess. Acting Chairman Pham has announced she will step down upon Mr. Quintenz’s confirmation. For more on the implications of a temporarily reduced Commission, see this Katten post.

[1] 7 U.S.C. § 1a(47)(A).

[2] 7 U.S.C. § 7a-2(c)(5)(C); 17 C.F.R. § 40.11; Brian D. Quintenz, Comm’r, CFTC, “Statement of Commissioner Brian D. Quintenz on ErisX RSBIX NFL Contracts and Certain Event Contracts” (Mar. 25, 2021), available at: https://www.cftc.gov/PressRoom/SpeechesTestimony/quintenzstatement032521.