Can You Regulate a Machine? Walt Lukken on the CFTC's Innovation Committee

**Walt Lukken** (0:00)
It got a little spicy for a second, but that's okay. That's what makes these meetings interesting, and that helps us to distinguish what we have to work on going forward.

**SPEAKER_2** (0:14)
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**Renato Mariotti** (0:51)
Welcome to The Policy Protocol, your weekly espresso shot of the latest in crypto law and policy. Everything that happened is still down to what actually matters.
I'm Renato Mariotti. My co-host, Rebecca Reddick, isn't with us this week. So what we have for you is an episode tightly focused on the biggest news item of the week, the Innovation Advisory Committee. If you haven't heard about it, it is a collection of all the biggest CEOs in the industry, from all the big names you can imagine, in a room, actually in person with the chairman of the CFTC, the chairman of that committee and others, walking through and talking about the biggest issues in policy and law facing our industry.
I bet even if you haven't heard about the committee, you have seen some of the viral clips that have been going around social media. Probably the biggest one is one that we'll take a look at right now.

**Terry Duffy** (1:49)
We're not a bunch of carnival barkers at a circus. We're running the most envious markets in the world in the United States of America. Chair Selig, President Trump, has said how they want to make America the crypto capital of the world. Well, we don't want to chase our own participants out of our own markets either. And by listing susceptible markets to manipulation, it is really doing the opposite of what we're trying to effectuate. So I would hope that the Commission...

**Michael Selig** (2:17)
I just want to correct the record there. Those products are not listed in the United States. They never were. This occurred offshore, and that's fake news.

**Terry Duffy** (2:25)
Okay, that's a cute comment, too. So you're suggesting that some of these sports events are not listed in the United States.

**Michael Selig** (2:34)
The Maduro contract and the teleprompter-related contract were not listed in the United States.

**SPEAKER_2** (2:39)
I understand.

**Terry Duffy** (2:39)
They're on polymarkets contract. They were listed overseas.

**SPEAKER_2** (2:43)
Fair?

**Terry Duffy** (2:43)
Yes.

**Renato Mariotti** (2:44)
Wow. Well, that exchange was between the chairman of the CFTC and the CEO of CME Group.
I will say that is really emblematic of a fight that is occurring in the courts. We talked about in a prior episode how CME Group has sued the CFTC in court and they're fighting it out. But here's the thing. What happens in a courtroom is not something we see. But you actually got to see here a real in-person conversation, talking about some of the same issues in some of the same arguments that CME Group is making. Really, I view this as part of a titanic shift and change in this entire space. We've talked about in prior episodes, how TradFi is integrating with FocChain and how these markets are changing. You got to see that here. You literally got to see some of those TradFi CEOs, like Mr. Duffy, coming into a room with lots of new entrants, lots of people in this industry and really hashing it out. Yeah, some of those debates got heated. But candidly, what I think this represents is a real change in the industry, okay? And a change in how financial services is really going to be evolving going forward.
But to me, I think if I'm thinking about the hot topic of the week, I think some of the bigger policy issues that came out of this Innovation Advisory Committee are a focus on the future, on the biggest issues that are going to face us going forward. And to me, no issue is going to transform how we handle finance going forward more than the intersection of artificial intelligence and financial services. I'm talking specifically about agentic finance, which was one of the big focuses of this committee. And in particular, one issue that I submitted a comment to this committee on, and it's shown right there, is the issue of agentic trading. You know, I prosecuted some of the biggest market manipulation cases in the white collar space, like the first spoofing case. And I proved those cases back when I was a federal prosecutor, using the programming that people put into place regarding the electronic trading, the instructions they gave trades, the communications that the trader gave. That's how we usually prove those cases. But what happens when a trading strategy is authored by an AI agent, and the AI agent is the one who devised the strategy. The AI agent is the one in there doing those trades and making those decisions. That is really interesting because instead of throwing the AI agent into prison or banning the AI agent from a particular industry, what you really are focused on if you are a regulator are things like supervision issues and registration issues and other types of regulatory offenses, which of course don't involve those types of severe penalties.