CFTC signals balanced regulation for U.S. agriculture and market innovation

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CFTC regulation for agriculture

Highlights

CFTC rejects a one-size-fits-all model for perpetual futures, allowing them only for bitcoin and crypto assets while excluding traditional agricultural contracts.
CFTC will reconvene its Agricultural Advisory Committee and host AgCon in October to gather industry feedback on market access, 24-7 trading, and risk management rules.
Selig opposes the Biden administration's Basel III proposal, advocating for lighter regulation on futures commission merchants and swap dealers to avoid higher hedging costs for farmers.

CFTC outlines agriculture-focused regulatory approach

As reported by the Commodity Futures Trading Commission, Selig tells the American Cotton Shippers Association annual convention in Charleston, South Carolina, that the agency is rejecting a one-size-fits-all approach to market innovation and regulation.

He says the commission supports new tools and broader access, but does not see perpetual futures as appropriate across all asset classes, particularly in agricultural markets that rely on physical delivery and limited trading hours. Selig points to the commission's recent approval of narrowly curated perpetual contracts tied to bitcoin and similar crypto assets, while stressing that such structures are not a natural fit for traditional farm commodities.

He also says prediction markets can serve as risk management tools, but argues agricultural contracts should remain aligned with traditional trading hours. In his remarks, he says regulation should reflect how family farms, merchants and rural businesses actually use derivatives markets rather than forcing agricultural products into models designed for other sectors.

Industry engagement and market access remain central

Selig says the CFTC is reviving its Agricultural Advisory Committee, with a first meeting scheduled for next month, and is also bringing back AgCon with Kansas State University in Kansas City this October. He says those forums are intended to give producers, agribusinesses and other market participants direct input on issues including 24-7 trading, capital rules, the Commitments of Traders report and risk management tools.

He adds that the agency is reviewing feedback on the Commitments of Traders report, including recommendations from the American Cotton Shippers Association, and is working on a draft memorandum of understanding with the U.S. Department of Agriculture to strengthen coordination. Selig also says he has hired the first Senior Agricultural Advisor to the chairman to keep the agency connected to industry concerns.

On costs and liquidity, Selig says he wants to avoid unnecessary regulatory burdens on futures commission merchants and swap dealers that could raise hedging expenses for farmers. He criticizes the Biden administration's Basel III proposal and says he has worked with prudential regulators on a less burdensome version aimed at preserving access to U.S. derivatives markets for agricultural users.

Our earlier article on the new federal farm bill talks covered the Senate Agriculture Committee’s discussion draft and the push to keep bipartisan momentum toward a five-year package. It highlighted House Agriculture Committee Chairman Glenn Thompson’s support for aligning House-Senate negotiations to modernize farm policy and provide longer-term certainty for producers and rural communities.

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