[Senate Hearing 118-125]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 118-125

         OVERSIGHT OF THE COMMODITY FUTURES TRADING COMMISSION

=======================================================================

                                HEARING

                               BEFORE THE

                       COMMITTEE ON AGRICULTURE,
                        NUTRITION, AND FORESTRY

                          UNITED STATES SENATE

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION
                               __________

                             March 8, 2023
                               __________

                       Printed for the use of the
           Committee on Agriculture, Nutrition, and Forestry
           
           
                  [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]           


                  Available on http://www.govinfo.gov/
                  
                  
                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
53-641 PDF                WASHINGTON : 2024                    


           COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY


                 DEBBIE STABENOW, Michigan, Chairwoman
SHERROD BROWN, Ohio                  JOHN BOOZMAN, Arkansas
AMY KLOBUCHAR, Minnesota             MITCH McCONNELL, Kentucky
MICHAEL F. BENNET, Colorado          JOHN HOEVEN, North Dakota
KIRSTEN E. GILLIBRAND, New York      JONI ERNST, Iowa
TINA SMITH, Minnesota                CINDY HYDE-SMITH, Mississippi
RICHARD J. DURBIN, Illinois          ROGER MARSHALL, Kansas
CORY BOOKER, New Jersey              TOMMY TUBERVILLE, Alabama
BEN RAY LUJAN, New Mexico            MIKE BRAUN, Indiana
RAPHAEL WARNOCK, Georgia             CHARLES GRASSLEY, Iowa
PETER WELCH, Vermont                 JOHN THUNE, South Dakota
JOHN FETTERMAN, Pennsylvania         DEB FISCHER, Nebraska

                 Erica Chabot, Majority Staff Director
                 Chu-Yuan Hwang, Majority Chief Counsel
                    Jessica L. Williams, Chief Clerk
               Fitzhugh Elder IV, Minority Staff Director
                 Jackie Barber, Minority Chief Counsel

                            C O N T E N T S

                              ----------                              

                        Wednesday, March 8, 2023

                                                                   Page

Hearing:

Oversight of the Commodity Futures Trading Commission............     1

                              ----------                              

                    STATEMENTS PRESENTED BY SENATORS

Stabenow, Hon. Debbie, U.S. Senator from the State of Michigan...     1
Boozman, Hon. John, U.S. Senator from the State of Arkansas......     3

                                WITNESS

Behnam, Hon. Rostin, Chairman, Commodity Futures Trading 
  Commission, Washington, DC.....................................     4
                              ----------                              

                                APPENDIX

Prepared Statements:
    Behnam, Hon. Rostin..........................................    30

Question and Answer:
Behnam, Hon. Rostin:
    Written response to questions from Hon. Debbie Stabenow......    38
    Written response to questions from Hon. John Boozman.........    41
    Written response to questions from Hon. Cory Booker..........    47
    Written response to questions from Hon. Ben Ray Lujan........    53
    Written response to questions from Hon. Raphael Warnock......    55

 
         OVERSIGHT OF THE COMMODITY FUTURES TRADING COMMISSION

                              ----------                              


                        Wednesday, March 8, 2023

                                        U.S. Senate
         Committee on Agriculture, Nutrition, and Forestry,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10 a.m., in room 
106, Dirksen Senate Office Building, Hon. Debbie Stabenow, 
Chairwoman of the Committee, presiding.
    Present: Senators Stabenow [presiding], Brown, Klobuchar, 
Bennet, Gillibrand, Smith, Durbin, Booker, Warnock, Welch, 
Boozman, Hoeven, Ernst, Marshall, Tuberville, Braun, Grassley, 
and Thune.

STATEMENT OF HON. DEBBIE STABENOW, U.S. SENATOR FROM THE STATE 
    OF MICHIGAN, CHAIRWOMAN, U.S. COMMITTEE ON AGRICULTURE, 
                    NUTRITION, AND FORESTRY

    Chairwoman Stabenow. Good morning. I call this hearing of 
the U.S. Senate Agriculture, Nutrition, and Forestry Committee 
to order and welcome today's witness, Commodity Futures Trading 
Commission (CFTC) Chairman Russ Behnam, as we examine issues 
affecting our Nation's derivatives markets. Thank you for 
always making yourself very accessible to the Committee. You 
certainly are no stranger to the Committee, and we really 
appreciate that, and your leadership at the helm of the CFTC. 
This is so important for effective oversight and transparency.
    The last time this Committee held a general CFTC oversight 
hearing, in February 2018, the agency was finalizing rules in 
response to the 2008 financial crisis. Today, the CFTC and our 
markets face new challenges. The pandemic tested the resiliency 
of our global food system. Labor shortages, transportation 
delays, and reduced consumer demand made it difficult for 
American farmers and ranchers to run their businesses and plan 
for the future. Just as the world began to recover from COVID-
related supply chain disruptions, Russia invaded Ukraine, 
triggering global grain and fertilizer shortages and driving up 
prices for food and energy.
    Meanwhile, we are facing the effects of the climate crisis 
through record-breaking storms, heatwaves, and droughts, all of 
which are devastating for farmers and ranchers. Extreme weather 
events, supply chain disruptions, and rising input prices are 
costing farmers more money and leading to higher prices for 
consumers.
    This is why our derivatives markets are so important. 
Agricultural producers trade futures to manage risk and provide 
greater certainty around how much they will earn from, and pay 
for commodities. It is the CFTC's job to make sure these 
markets are working properly and are free from abuse, 
particularly in times of stress when our producers need them 
the most.
    Against this backdrop, the steady drumbeat of technology is 
changing the way financial markets operate, and who uses them. 
It is now possible to trade from almost anywhere at any time. 
Futures exchanges are offering more products geared toward 
individuals, and many people hold commodity funds in their 
retirement plans.
    Crypto assets promise everyday Americans an easy way to 
speculate in financial markets, but in reality they are 
volatile and riddled with fraud, as we have seen. The massive 
customer losses caused by this misconduct highlight exactly why 
we need Federal oversight of the crypto industry, and I remain 
committed to working with my colleagues to hold crypto 
companies to the same rules as traditional financial firms.
    As more retail investors trade futures and crypto assets, 
the CFTC must ensure its customer protections are suitable for 
this group of investors. Customers should have access to 
education and information about their investments, presented in 
a way that is appropriate for their level of experience. 
Financial markets must be fair for all participants, free of 
conflicts of interest that give the few an unfair advantage 
over the many.
    While the digital transformation of our financial system 
brings efficiencies, it also exposes vulnerabilities. 
Cyberattacks are a prominent threat to our financial stability 
and our national security. The CFTC must be vigilant in 
protecting derivatives markets from cyber threats. I would like 
to hear whether additional authorities or resources are needed 
to meet this challenge.
    Our nation's derivatives markets are fundamentally 
different than they were 15 years ago, in the wake of the 
financial crisis, yet Congress has not reauthorized the CFTC 
since 2008. This is long overdue. The Commission's resources 
have not kept pace with their ever-expanding responsibilities, 
including monitoring the $350-trillion-dollar global swaps 
market.
    We have recently heard criticism that the CFTC is too small 
and does not have the resources to take on additional 
responsibilities as commodity markets evolve. I reject this 
thinking. The CFTC's mission is too important.
    In the 15 years since the agency was last reauthorized, the 
CFTC has received $3.5 billion in appropriations. In that same 
time, the CFTC has imposed nearly $20 billion in penalties. 
This is a remarkable return on investment for the American 
people, and demonstrates the agency's commitment to rigorous 
law enforcement. I hope we can come together to support more 
robust funding for the agency.
    The work of the CFTC is critically important to our 
Nation's economy. I look forward to hearing today about how the 
agency is responding to new challenges, and how Congress can 
assist in that effort.
    With that I will turn to my friend and Ranking Member, 
Senator Boozman.

STATEMENT OF HON. JOHN BOOZMAN, U.S. SENATOR FROM THE STATE OF 
                            ARKANSAS

    Senator Boozman. Well, thank you, Madam Chair, for having 
the hearing today. It is very important. Thank you, Chairman 
Benham, for being here.
    I was on the school board for several years and normally 
there were not many people at the school board meetings. That 
was a good thing. I drove into the parking lot and saw a bunch 
of cars and I thought, I hope we are honoring the band or the 
choir or something, or we are in trouble. Looking at the crowd 
it looks like things are going very well at CFTC, which is a 
good thing.
    The CFTC is vital to our agriculture stakeholders who have 
used derivative markets for price discovery and risk management 
for over 150 years. The information from these markets 
underpins many of the risk management tools administered 
through USDA's Federal Crop Insurance Program. Futures and 
options contracts have been effective because the CFTC 
implements comprehensive rules, diligently polices the cash and 
derivative commodity markets, and works to protect market 
participants.
    Through a pragmatic, principles-based approach, the CFTC 
has built and implemented constructive, workable, regulatory 
frameworks for markets to function efficiently. One needs to 
look no further than to the futures market, which has proven to 
be the gold standard and one of the most resilient markets in 
times of market stress, largely due to the CFTC's regulatory 
framework. We witnessed this during the pandemic, producers 
hedging their risk weathered market volatility and emerged 
relatively unscathed. The CFTC was the cop on the beat, 
monitoring the futures markets to ensure that even in times of 
unprecedented disruption, end users' positions were safe.
    Because of the important role derivative markets play in 
price discovery and liquidity for agricultural risk management, 
it is essential the Committee exercise its oversight authority 
and ensure the CFTC is continuing to implement a balanced 
regulatory regime and reasonable enforcement approach that 
protects market participants against fraud and manipulation. 
This legacy must continue.
    Regarding regulation, the CFTC must remain committed to its 
principle-based regulatory framework. Participants deserve 
clear rules and transparency in these marketplaces. The CFTC, 
like any regulatory agency, needs to deliver guidance in a 
clear and timely manner. Anything short of that creates a 
climate of uncertainty and additional risk for end users.
    That is why I am pleased to see Chairman Benham recently 
committed to considering codifying certain no-action relief. I 
encourage the agency to do so soon where no-action letters have 
been repeatedly extended.
    Again, timeliness is key here. If extension of relief is 
needed, it should be granted sooner rather than later.
    When properly enacted, this framework, along with trust 
between regulators and participants, are leading contributors 
to a successful regulatory atmosphere. In order to maintain 
that trust, any data sharing between agencies must be limited 
and done with proper protections in place.
    That is precisely why Congress explicitly granted the CFTC 
sole authority to publish specific and anonymized market 
participant data in Section 8 of the CEA. The only exceptions 
are for limited legal actions taken by the government.
    No other agency has the expertise to publish this sensitive 
and proprietary material in a manner that safeguards 
registrants' data and protect their confidentiality. If this 
important responsibility is not handled properly, it will cause 
registrants to lose trust and in turn damage a vibrant market, 
risk eroding liquidity, and undermine price discovery.
    I also believe the CFTC deserves adequate funding in order 
to effectively regulate, and I am committed to that goal. 
However, increased funding must not come from user fees. That 
is the discussion that we will have, and again, we are totally 
committed though to seeing how we can give you the resources 
that you need to continue to function so effectively.
    User fees are passed down to agriculture end users and may 
cause market participants to exit markets, which reduces the 
liquidity necessary for farmers to hedge against pricing risk. 
Given the volatility of commodity markets, Congress should not 
impose another burden on agriculture's ability to manage risk.
    Finally, the CFTC has a role in regulating digital 
commodity markets, and recent market events reinforce the need 
for greater Federal oversight of the industry. This committee 
has studied this emerging sector and the recent events which 
have caused consumers to question the safety of digital 
commodity markets. I am confident the CFTC is suitable for an 
expanded role in regulating the digital commodity spot market. 
I am committed to working with Chairwoman Stabenow and our 
colleagues to create the safeguards the market needs.
    I look forward to Chairman Benham's testimony about how our 
derivatives and commodity markets are functioning, the work the 
agency is undertaking, and ideas on how to improve the agency 
and the marketplace in these challenging times.
    With that I yield back.
    Chairwoman Stabenow. Thank you very much, and just for the 
members, we have a vote that I understand will be starting at 
10:45, and so we are going to continue the hearing. When that 
does start I will go vote, come right back, and then at some 
point Senator Boozman will do the same. We will juggle this, 
this morning.
    Let me turn to Chairman Behnam, and welcome again.

   STATEMENT OF THE HON. ROSTIN BEHNAM, CHAIRMAN, COMMODITY 
           FUTURES TRADING COMMISSION, WASHINGTON, DC

    Mr. Behnam. Good morning, Chairwoman Stabenow, Ranking 
Member Boozman, and members of the Committee. I appreciate the 
opportunity to discuss the state of the CFTC with you this 
morning.
    In recognition of Women's History Month and International 
Women's Day I first and foremost want to acknowledge all the 
women in attendance, both in person and virtually and at the 
CFTC, and also to commend my colleagues, Commissioners Johnson, 
Goldsmith Romero, Mersinger, and Pham, for their leadership and 
public service to this country. I would also like to recognize 
and thank all CFTC staff for their continued dedication and 
commitment to the American public.
    During the past three years, CFTC rules and regulations 
have ensured that the derivatives markets performed well for 
businesses who are able to hedge price risk under extreme 
pressures brought on by the pandemic, geopolitical tensions, 
and extreme weather. I last appeared before this Committee to 
address the clear absence of any regulatory standards for the 
digital asset commodity market. Today I would like to share 
some of my thoughts on how the adoption of innovation and 
technology is more broadly changing the nature of our markets 
and what statutory amendments should be considered since the 
CFTC's authorization lapsed in 2013.
    Strengthening our rule set is a major priority for 2023. 
Looking at over 30 matters for consideration, themes emerge: 
enhancing risk management and resilience, fostering sound and 
responsive practices regarding cybersecurity and the use of 
third-party service providers, strengthening customer 
protections, promoting efficiency and innovation, improving 
reporting and data policy, and addressing any duplicative 
regulatory requirements and amplifying international comity and 
domestic coordination with both Federal and State regulators.
    Last month the Commission issued its first public statement 
on the cyber-related incident at ION Cleared Derivatives. 
Current law could not have prevented the ION incident, as the 
direct regulation of third-party service providers is beyond 
CFTC jurisdiction. Recognizing the relevant risk, I have asked 
our Market Participants Division, which is currently developing 
rule proposals, to address both cybersecurity and related risk, 
to further identify potential weaknesses with respect to third-
party service providers and vendor relationships, and identify 
appropriate solutions for Commission consideration.
    However, even if the Commission supports a rulemaking in 
this area, with growing cybersecurity risk permeating all 
elements of our financial markets, I believe this Committee's 
reauthorization effort should consider what role and 
relationship the CFTC should have with third-party service 
providers and vendors of registered entities.
    Extreme weather events contributed to the confluence of 
factors that defined commodity volatility in 2022. The 
Commission both domestically and in international workstreams 
is continuing to engage through the Climate Risk Unit. One such 
effort involves the voluntary carbon markets, which are 
jurisdictional to the CFTC in light of listed futures on 
registered designated contract markets. These markets require a 
new way of thinking, present questions requiring careful 
examination, and benefit from the public-private partnership 
that is the hallmark of the CFTC.
    As I discussed in December, the CFTC does not have direct 
statutory authority to comprehensively regulate cash digital 
commodity markets. Its jurisdiction is limited to its fraud and 
manipulation enforcement authority. In the absence of direct 
authority and surveillance authority for digital commodities in 
an underlying cash market, our enforcement authority is by 
definition reactionary. We can only act after fraud or 
manipulation has occurred or been uncovered. Comprehensive 
regulation would enable us to establish market structures and 
regulatory barriers, guardrails, and guidance that would 
prevent fraud before it happens, and fully deploy transparency 
and surveillance tools to see fraud when it does occur.
    With the recent expansion of direct retail participation in 
the derivatives markets and in the underlying commodity markets 
such as those for digital commodity assets, the CFTC must be 
able to ensure that the products offered are suitable, that the 
barriers to entry are meaningful, and that the disclosure 
information provided is material to the decisionmaking. The 
Commission will remain vigilant with respect to our registered 
entities and use our existing tools and authorities to the 
fullest extent of the law and the authority we are given to 
propose stronger rules, monitor and surveil the markets, and 
root out misconduct wherever it lurks.
    As Chairman, in January 2022, I appointed the CFTC's first-
ever Chief Diversity Officer who oversees the agency's office 
of Minority and Women Inclusion. I am eager to see the CFTC's 
OMWI statutorily authorized, similar to other Federal financial 
regulators. This would expressly authorize us to assess the 
diversity policies and practices of entities regulated by the 
agency, submit annual reports to Congress, and allocate 
additional resources and staff toward outreach and engagement.
    As this Committee knows, the overwhelming success of the 
Whistleblower Program has led to the potential for disruptions 
in continuity of CFTC operations for the Whistleblower Office 
and the Office of Customer Education and Outreach. In addition 
to the importance of a long-term fix to avoid one-time 
depletions that are greater than the total balance of the 
whistleblower fund, I believe amendments to the statutory 
provisions describing the permitted uses of the Customer 
Protection Fund would allow the Commission to implement a host 
of new investor protection programs.
    More than five years ago I testified before this Committee 
during my nomination hearing to be a CFTC Commissioner. In my 
opening statement, I remarked that, quote, ``as this Committee 
shifts focus to the 2018 Farm Bill, I commit to working with 
each member of this Committee to ensure the CFTC remains both a 
desirable and cost-effective risk management and price 
discovery tool for agricultural producers and the entire value 
chain.'' This commitment remains my anchor, and as this 
Committee now considers the 2023 Farm Bill, I remain committed 
to this promise.
    Thank you, and I look forward to answering your questions.

    [The prepared statement of Mr. Behnam can be found on page 
30 in the appendix.]

    Chairwoman Stabenow. Thank you very much.
    Chairman Behnam, in a recent speech you said that the 
volume of futures trading by retail investors is about 50 
percent higher today than it was before the pandemic. I am 
concerned that the current regulatory framework may not be 
sufficient to protect these individual investors. Can you talk 
about how the CFTC defines a retail investor and what the 
Commission is doing to address their increased participation in 
the futures markets?
    Mr. Behnam. Thank you, Senator. Extremely important 
question given what you said and some of the data that we have 
collected and analyzed over the past few years.
    The way we generally characterize a retail investor is by 
sort of the characteristics of the individual and the trades 
they are making. The amount of money they are posting for 
margin, what types of products they are investing in--they 
typically invest in micro or nano contracts, which are smaller 
contracts. They have short durations of trading periods as 
opposed to longer durations, where they leave a position open. 
They are typically trading for their personal account as 
opposed to a customer's account.
    Unfortunately what we have seen in analysis is retail 
traders, or those that are at least defined by those 
characteristics, generally tend to lose money.
    Other than that there is no prescriptive or statutory 
definition of a retail investor. We have some definitions 
around an eligible contract participant and what is not an 
eligible contract participant. As you pointed out, given the 
growing demand but also growing state of the retail investor I 
think it would be important for the Committee to consider a 
definition so that we could essentially create protections 
around that.
    I would not want to question our segregation rules, our 
conflicts of interest rules, our disclosure rules, our 
relationship with intermediaries, which are our brokers, the 
futures commission merchants. These entities and our customer 
protection rules are very resilient and they are durable and 
they are very strong. I think given the growth of retail 
investors we are using every tool we have, which is mostly, as 
I mentioned in my opening remarks, through the Office of 
Customer Education and Outreach, to ensure that we are getting 
as much information through disclosures, through pamphlets, 
through in-person meetings, through various State agencies and 
other working groups, to make sure investors ultimately know 
the risks involved with leveraged derivatives markets and how 
they are allocating their capital.
    Chairwoman Stabenow. Thank you. I encourage CFTC to 
continue to really look at this, to really study it, and let us 
know if there are issues that we need to be addressing around 
language, accountability, and so on.
    Mr. Behnam. Absolutely.
    Chairwoman Stabenow. Absolutely.
    Let me speak a minute about the risks and impacts around 
the climate crisis because there are serious risks, as we know, 
to our financial system and our food security. No one bears the 
burden of increased temperatures and droughts and flooding more 
than our agricultural producers. Last year the CFTC requested 
information from the public about actions the agency can take 
to address climate-related financial risks.
    I wonder what you can tell us about what you learned from 
that public engagement process and how will the CFTC respond?
    Mr. Behnam. Thank you, Senator. I am going to start 
quickly, and I mentioned this in my statement as well, on the 
voluntary carbon markets. I would say there was a fairly 
unanimous consensus that the CFTC should use its enforcement 
authority around cash voluntary carbon markets. As you know we 
have a jurisdictional interest in voluntary carbon markets 
because we do have listed carbon offset contracts on registered 
CFTC exchanges. Not unlike crypto, this creates a 
jurisdictional connection between us and the cash voluntary 
carbon market.
    We will use every tool we have within the enforcement 
division to ensure that we are policing those markets so that 
they have integrity and that the futures markets are both 
resilient but reflective of price discovery and risk 
management.
    Moving away from voluntary carbon markets I would point to 
some areas that had maybe a bigger divide between supporters 
and opponents with typical things around the climate space, 
disclosures, data management, scenario analysis or stress 
testing under different climate scenarios. We are collating, 
essentially, those comments, trying to put them together, and 
then drawing out a path for 2023 of what policies we can push 
out that would be reasonable, sensible, and have a large 
coalition behind them.
    We certainly want to build as much of a coalition around 
policies but also understand, as you point out, there are 
certain climate risks that we are going to have to address, and 
if policy is able to do that we will certainly move forward in 
a pretty swift manner.
    Chairwoman Stabenow. Thank you very much. Then finally, 
cybersecurity you mentioned, and companies registered with the 
CFTC are required to comply with the agency's cybersecurity 
rules, but what about third-party service providers, like ION, 
and what can you do to strengthen the financial markets' 
defenses against these increasingly sophisticated cyberattacks?
    Mr. Behnam. Thank you, Senator. Extremely important 
question, and as I pointed out, we do not have jurisdiction 
over third-party service providers. We are in the process of 
updating our cyber rules, and we will accompany that cyber rule 
with a guidance document on third-party service providers. From 
the vantage point of third-party service providers, which are 
very heavily used by industry because of technology needs and 
expertise, the vendor itself has to comply with the 
requirements of the registrants, which we set principles and 
standards for.
    Ultimately I think it is going to be incumbent on the 
Commission to think about expanded authority for the agency, 
for the Committee to consider expanded authority for the CFTC, 
and I would use, as an example, the banking supervision and the 
banking regulators authority over third-party service 
providers. They essentially have supervisory or examination 
authority over vendors that are providing a service to a 
regulated entity.
    You can imagine a CFTC-regulated entity outsources a 
service to a vendor. In a situation or a scenario could we 
potentially have supervisory or examination authority over that 
vendor because the vendor is providing a regulated service to 
the regulated entity. I think that would be a step forward, 
provide a little bit more assurance, but as you point out, 
cyber risk is hugely important and we are doing everything we 
can to send signals to the market that this has to be a top 
priority for every entity that is registered with us.
    Chairwoman Stabenow. Incredibly important. Thank you very 
much.
    I will now turn to Senator Boozman.
    Senator Boozman. Thank you, Madam Chair. What I would like 
to do is go ahead and defer to Senator Marshall and then get 
back in the order.
    Chairwoman Stabenow. All right. Senator Marshall.
    Senator Marshall. Okay. Thank you, Madam Chair, and welcome 
again back to the Ag Committee, Chairman Behnam.
    The first advice I got from Senator Roberts when I was 
helping write the farm bill five years ago was to go sit on the 
tongue of the wagon and listen to the farmers. I found a couple 
of places more comfortable than the tongue of the wagon, but we 
have been talking to farmers. One of their top concerns is what 
is going on at the CFTC, and maybe they are just looking for 
some certainty and some clarity.
    My farmers and ranchers have noticed that the CFTC has been 
focusing more and more on the Administration's climate agenda. 
In June of last year, you had a voluntary carbon convening to 
discuss the carbon offsets market.
    Your role is largely in the derivatives market, which my 
farmers and ranchers use as a risk management tool. Is it 
prudent for you to be pushing a carbon market agenda rather 
than to be focusing on your traditional responsibilities?
    Mr. Behnam. Thank you, Senator. I would say first and 
foremost we are absolutely focused, as I said in my statement, 
on our traditional markets. This the No. 1 priority. On the 
sponsor of the Ag Advisory Committee we convened a good group 
and we are always focused on our agricultural markets above all 
else.
    Regarding the voluntary carbon markets convening, as I 
pointed out earlier we have to be very cognizant of our 
jurisdictional markets. What I mean by jurisdictional markets 
is that if we have listed futures on regulated CFTC exchanges 
then the cash markets become important to us. Because if there 
is potential for fraud or manipulation in a cash market, that 
fraud or manipulation can be reflected in the markets that I 
regulate.
    As we more commodity markets become retail oriented and are 
unregulated but are listed on derivatives platforms that are 
regulated by the CFTC, I think it is very incumbent that we 
have a look forward to what could potentially be a detriment or 
an issue for our markets.
    Senator Marshall. Certainly $350 trillion was the number 
you quoted in derivatives you are overseeing, so I am sure that 
does take up a lot of your time, most of your time.
    We have also noticed that you are looking at climate-
related risk to your traditional products. The conversation 
around ESG requirements and financing has folks worried about 
access to capital unless they conform to some mandated climate 
policy.
    As you study climate-related risk is it your intention to 
bar risk management at the CFTC unless a person conforms to 
climate policies? I just have to add, farmers and ranchers were 
the original stewards of the land, and no one is working harder 
to practice sound environmental farming than our producers back 
home.
    Mr. Behnam. Thank you, Senator. I could not agree with you 
more about that, understand that, in fact, farmers are the most 
important stewards of our land. I would say that thinking about 
the climate issues and some of the extreme weather events we 
are experiencing, my focus is just to ensure that our markets 
and the infrastructure that our markets are built on remains 
resilient as we continue to face dramatic extreme weather 
events. This could be from the exchanges to the clearinghouses 
as well.
    I think to your point, we will not create any policy that 
will force an action. It is just about ensuring robust, 
resilient markets that are thinking about future risks, and in 
this case weather events that are actually putting a lot of 
volatility and pressure on commodity prices, and we need to do 
what we can at the CFTC to ensure that these markets remain 
strong and resilient.
    Senator Marshall. Thank you. The more flexibility we can 
give our farmers and ranchers the better the environment is 
going to do with their practices.
    I want to talk about crypto for a second. When it comes to 
crypto I have consistently said that my biggest concern is 
addressing the criminal activity that crypto facilitates. It 
has recently come to my attention that the world's largest 
crypto exchange, Binance, has set up a U.S.-based entity that 
internal executive has said is a, quote, ``de facto 
subsidiary,'' end quote, as a way to shield their main platform 
from regulations. This is the same platform where $2.35 billion 
in funds that we know about were laundered through their 
platform. This is concerning, to say the least.
    Though I am encouraged to see reports that the CFTC has 
multiple investigations into Binance for a number of different 
infractions I would love to hear more about these efforts, 
outside this hearing, of course, if we are able.
    Both before and after the collapse of FTX there have been 
ongoing conversations about who should have regulatory 
oversight of cryptocurrencies, the SEC or the CFTC. Do you 
believe that CFTC has the resources and expertise necessary to 
bring these out-of-control crypto exchanges, the Wild West as 
it has been called, who seem to think that they have the right 
to do whatever they want, into compliance?
    Mr. Behnam. Thank you, Senator. I have full confidence that 
we have the expertise and personnel to regulate the crypto 
markets. We also have a legacy understanding of market 
regulation, which I think can be implied, in many respects, in 
the same way over crypto markets. What we do not have is 
resources.
    I think as this Committee considers possible regulation or 
statutory authority for crypto regulation I think it would be 
incumbent for us to have additional resources to implement and 
impose that regulatory system over the crypto markets.
    Senator Marshall. I am not sure it is a fair question. On a 
scale of one to ten, how concerned are you about the crypto 
industry right now?
    Mr. Behnam. Seven and a half.
    Senator Marshall. Thank you. I yield back.
    Chairwoman Stabenow. All right. Thank you very much.
    Senator Brown.
    Senator Brown. Senator Marshall, as the Chair of the 
Banking and Housing Committee I am an 8.2. I just thought I 
would throw that in.
    [Laughter.]
    Senator Brown. I actually am higher than 8.2, and I know of 
your work on it. I thank you for your work.
    Madam Chair and Senator Boozman, thank you. Madam Chair, I 
so appreciate--I know this is your last farm bill--I so 
appreciate the serious bipartisan and bicameral way you are 
looking at this bill, so thank you for doing that.
    Nice to see you again, Russ. Thank you for being here.
    I want to sort of follow, peripherally maybe, but some of 
the things my colleague just said. Your new enforcement 
director at CFTC has extensive experience as a Federal 
prosecutor, bringing cases on cybercrime and complex fraud. All 
good signs. I think it is important as our markets become more 
complex, and as we have seen with crypto market participants, 
they are not starting with the best compliance programs.
    Walk through your goals for enforcement and what are the 
areas that give you the most concern?
    Mr. Behnam. Thanks, Senator. I did very intentionally bring 
in a former prosecutor who has experience both on the cyber 
side, the crypto side, but also on the commodity side. He had 
done a fair amount of work with the CFTC's New York office when 
he was working in the Southern District in New York.
    When I think about the landscape of our markets and the 
markets that have the most impact on commercial end users, on 
retail, on Americans, obviously commodity markets in an 
environment where commodity prices are extremely volatile, 
because of geopolitical issues, still sort of residual COVID 
challenges, and of course, because of climate issues, making 
sure that commodity markets are reflective of supply and demand 
and are free from speculative activity that is pushing prices 
outside of that supply and-demand bandwidth is a priority.
    Crypto is an unregulated market. You and I have discussed 
this. The Committee obviously care deeply about it. We brought 
over 70 crypto cases in the past seven or eight years, without 
authority, to police markets, other than this very small fraud 
and manipulation authority. It continues to be a priority so 
that we can protect retail customers who are trading in these 
markets.
    Then cyber, as I mentioned, continues to be a huge risk for 
the agency and financial markets generally. It is a single 
point of risk for any one regulator and the entire financial 
ecosystem, so that we really all have to have all hands on 
deck. To the extent that we can have a strong enforcement 
director who is sending a clear message about stepping up the 
standards around cybersecurity I think that will be very 
effective and impactful on our markets.
    Senator Brown. Thank you.
    Last year, following Russia's barbaric and illegal invasion 
of Ukraine, commodities markets, as you know, experienced 
volatility as the supply of certain agricultural commodities 
was jeopardized and the demand for many commodities was 
uncertain.
    Talk about some of the lessons CFTC learned from that time, 
and do you have any concerns about the adequacy of margin 
requirements or supervision of traditional commodity markets?
    Mr. Behnam. Thanks, Senator. We have done a fair amount of 
work, and I have personally myself done a fair amount of work, 
both domestically and within international, multilateral 
organizations. This question you ask about margin requirements 
in extreme volatile periods is a huge challenge because it is 
essentially a strain on the balance sheet of a financial 
company that has to come up with collateral in a short period 
of time. That strain ends up having potentially downward 
effects on other parts of the balance sheet and could affect 
other markets that are regulated by the SEC or prudential 
regulators.
    We are very cognizant of that, but as we have looked at the 
data and the periods of volatility, what we have seen that has 
given me some level of comfort is that the demand for 
collateral is directly correlated with the volatility we saw. 
As much as it is a strain on the balance sheets and puts 
pressure on the financial institutions to have to come up with 
this margin, it is in direct correlation with the volatility. 
It is just an indication of how volatile commodity markets were 
in both 2020 but then also after, as you point out, Russia 
invaded Ukraine.
    We are constantly reviewing the system. We are making sure 
that the clearinghouses are being transparent, that they are 
sharing with the clearing members the margin methodologies, is 
the term we use, but essentially how they calculate margin, and 
will continue to look at that, to make sure that part of our 
regulated system, the clearinghouse, is the most important one, 
because it is systemically important in many circumstances.
    Senator Brown. Do any of those lessons that you just 
mentioned, does that translate to crypto markets in any way?
    Mr. Behnam. I would say that we have to be mindful of 
leveraged markets. Our markets are leveraged for a reason. It 
creates incentives for end users to hedge risk. As we are 
seeing a growing demand for crypto derivatives we have to be 
mindful of the intent, the purpose, and the utility of crypto 
derivatives and making sure that margin requirements in these 
markets are sufficient, adequate, and essentially eliminate 
risk to the extent it is possible.
    Senator Brown. Thank you. Thank you, Madam Chair.
    Chairwoman Stabenow. Thank you very much.
    Now Senator Boozman is passing again to Senator Tuberville. 
I am not sure Senator Boozman wants to ask questions. He is 
enjoying listening.
    All right. Senator Tuberville.
    Senator Tuberville. I think he is trying to learn 
something.
    Chairwoman Stabenow. I think so.
    Senator Tuberville. Thank you, Senator Boozman. Thank you 
very much. Chairman, thanks for being here today. Thank you for 
what you are doing.
    The last several months have shown that Congress has got to 
get its act together and regulate cryptocurrency in a way that 
protects consumers and encourages innovation within the United 
States.
    When you look at the three main bills--Stabenow, Boozman, 
Loomis-Gillibrand and the House ag bill--do you have a view on 
which bill gives the best clarity of regs?
    Mr. Behnam. Senator, you know, they all have components of 
it, which I think are very beneficial, and I think ultimately, 
when I think about the intent of the bills, it is to create 
transparency. It is to regulate the market. It is to shed light 
on those markets so that we do not run into situations like we 
did a few months ago.
    I would say that specifically the Gillibrand-Lummis bill is 
very expansive, and I think that is, in part, because Senator 
Lummis is on the Banking Committee and she has a larger view of 
the crypto markets. Having worked with this Committee on the 
DCCPA, which is Senators Stabenow and Boozman's bill, that is 
very narrowly tailored to the CFTC, what authority we have, and 
what is jurisdictional to our markets, which is commodity 
digital tokens as well.
    The House bill is also very good. I think there are some 
challenges that I have spoken with members on the House side 
about making sure that we have Federal oversight to create a 
single market system for the crypto industry.
    Chairwoman Stabenow. I would just add the correct answer is 
the Stabenow-Boozman bill.
    [Laughter.]
    Senator Tuberville. He is straddling the fence, Madam 
Chair. He is a pretty good politician.
    Can the CFTC currently block a Chinese company from buying 
a U.S. crypto exchange or is legislation needed to prevent that 
type of transaction from happening?
    Mr. Behnam. Senator, assuming that other parts of the U.S. 
Government would not get in the way or make a decision that 
would prevent that acquisition, the CFTC alone does not have 
the authority to prevent an acquisition of that type.
    Senator Tuberville. Okay. Thank you. Do you see 
similarities between crypto markets and foreign currency 
exchange markets?
    Mr. Behnam. Well, I actually do not because foreign 
currency exchange markets, you know, on the derivatives side, 
are very well regulated. If nothing else, there are lessons 
learned. This Committee took up provisions around the retail 
forex market about 15 years ago, and I would say lessons were 
learned from that exercise, because leading up to that 
legislation, which occurred in 2008, I believe, the retail 
forex market was unregulated. There was a lot of fraud, there 
was a lot of manipulation, and there was a lot of taking 
advantage of retail investors. I think there was a lot of 
concern about why do retail investors need to be trading forex. 
Ultimately as that comprehensive regulatory system was put in 
place what we saw was an immediate withdrawal of the 
fraudsters, so to speak, and a relatively healthy market.
    I think that is a lesson to what are the benefits and 
attributes of comprehensive regulation, and putting aside the 
utility and what some folks think about the usefulness of 
crypto or not, regulation, I think, is important for customer 
protections.
    Senator Tuberville. Is there anything we can learn from 
foreign exchange market regulations that you can think of?
    Mr. Behnam. In the crypto space, as I have had discussions 
with you, Senator, and other members of the Committee, you 
know, there are jurisdictions that are moving forward on crypto 
regulation. I am personally in contact with my counterparts in 
Europe and Asia to see what they are doing and how they are 
doing it. I still am not concerned about sort of a race to 
regulate because of the fear of technology necessarily moving 
away, but that said is we have to keep that on our mind because 
eventually that inflection point will occur where we do need to 
move forward.
    I think we need to stay true to what we do in the United 
States, and as policymakers being deliberative, cautious, and 
patient, but we, in fact, do need to make sure that we are 
always moving forward.
    Senator Tuberville. The lack of progress by the CFTC and 
the SEC to define which crypto tokens are commodities and which 
tokens are securities is an issue. It prevents more crypto 
futures contracts from coming to market. Are you having these 
conversations with the SEC, and has the SEC offered legal 
opinions as to what it views as a commodity and what it views 
as a security?
    Mr. Behnam. Thanks, Senator. Just to answer the first part 
of the question, without hesitation I, myself, am working 
closely with my counterpart, and staff in my office and across 
the agency is consistently and constantly working with the 
agency, the SEC, to ensure that we are coordinating in a 
meaningful way. We do not have necessarily any legal guidance 
from the SEC but we are thinking about how we could work 
together, which we have done historically in a number of other 
markets, to ensure consistency, clarity, and transparency for 
the market.
    I think as you recognize this is a very difficult issue, 
and in many respects we can lean on legacy precedent to define 
a digital asset, whether it is a commodity or a digital 
security. In many respects also there are characteristics of 
digital assets that are very unique from traditional assets, 
and they do need a sort of new way of thinking. I think it 
would be incumbent for both regulators and the executive branch 
to work with Congress to ensure that we establish a framework 
that we can all get behind.
    Senator Tuberville. Thank you for your hard work. Thank 
you, Madam Chair.
    Chairwoman Stabenow. Thank you. Senator Klobuchar.
    Senator Klobuchar. Well, thank you very much, Madam Chair, 
and thank you, Senator Boozman, for hosting this hearing and 
calling this hearing. Thank you, Mr. Chairman. I want to 
followup with the last of Senator Tuberville's questions about 
the need and reinforce the need to coordinate with the SEC.
    In your testimony you note the Commission has brought 70 
enforcement actions involving digital assets. We thank your 
staff for your efforts. Could you just step back a little and 
describe, because of the Commission's limited authority, how 
you can only go after bad actors after the fact?
    Mr. Behnam. Thanks, Senator. Unfortunately because we do 
not have comprehensive regulation and authority, which, just to 
use an example, in our traditional markets we have surveillance 
tools, we have registration authority, all different tools that 
essentially create a compliance environment that enables the 
CFTC to identify fraud or manipulation while it is happening or 
potentially before it is happening.
    In the crypto space, which is unregulated, we have 
authority to police fraud and manipulation, and that is the 
only authority under which we can bring an enforcement case. We 
have to rely on tipsters, complaints, and individuals coming to 
us and saying, ``We have identified fraud'' or ``We have seen 
manipulation'' to come to us.
    Unfortunately it is limited, but we are doing everything we 
can.
    Senator Klobuchar. That is why legislation enabling the 
CFTC to require more transparency and conduct more market 
surveillance would help you greatly to prevent deception and 
consumer abuse?
    Mr. Behnam. Tremendously, yes.
    Senator Klobuchar. Okay. You previously testified about 
your concerns with leverage, interconnected markets, and 
contagion risks with digital assets and the exchanges they are 
traded in. When FTX collapsed last year we saw the effect on 
the wider cryptocurrencies ecosystem, with companies like 
BlockFi, Inc., a crypto lending business, that had received 
financing from FTX, filing for bankruptcy.
    How does the CFTC view the state of interconnectedness in 
the cryptocurrency market post FTX collapse?
    Mr. Behnam. Thanks, Senator. Certainly we have seen 
valuations of the crypto market come down pretty significantly 
since the collapse of FTX, but we do not view that as a 
permanent change and we are constantly thinking about the 
interconnections between all parts of the crypto market. We 
have to anticipate a scenario where markets might increase in 
size and volume and then present financial stability or market 
resiliency risks again.
    We are doing what we can with the authority we have. It is 
limited, as you pointed out, but we are ensuring that we are 
using this enforcement authority to bring bad actors to 
account.
    Senator Klobuchar. Okay. During your nomination hearing you 
and I spoke about the importance of including the needs of 
farmers, ranchers, and energy producers in the Commission's 
mission. You know better than anyone, farmers who rely on 
futures markets for hedging purposes have needs that are 
different from those of Wall Street traders.
    What are the distinct needs of farmers as end users of 
futures products that deserve particular attention from this 
Committee?
    Mr. Behnam. I think No. 1 is ensuring that the products 
remain cost-effective and efficient and are meeting the demands 
of the farmer as price discovery and risk management. We have 
seen a consolidation in the market, which I think is not unique 
to the derivatives space, especially since 2008, and the Dodd-
Frank Act. I think that creates limitations for some of the 
smaller end users, like farmers and ranchers in Minnesota, to 
be able to use derivatives markets.
    As you know and as you are working on, the farm bill will 
provide tools and crop insurance and commodity programs. 
Historically, futures markets were just another title in the 
farm bill and we have to make sure that futures markets remain 
a risk management tool, a cost-effective risk management tool 
for the agricultural economy.
    Senator Klobuchar. You know as well as anyone how the 
supply chain disruptions created price volatility. Senator 
Thune and I passed a major bill on shipping reform that I 
believe was helpful. We continue to have disrupted markets for 
agricultural inputs and commodities. Farmers are still 
concerned about this in my State. Could you speak to the ways 
that the CFTC works with farmers and ag industries to take into 
account the commercial risks inherent in ag production, 
processing, and marketing?
    Mr. Behnam. Thank you, Senator. Personally I am engaged 
with the agricultural economy through advisory committees, 
ensuring that we are visiting different parts of the country 
and seeing what issues they are facing, whether it is shipping, 
whether it is trade, any national security issues, and we are 
just constantly working and ensuring that our markets, as I 
pointed out earlier, are succeeding in achieving the price 
discovery and risk management function. I think that, in many 
respects, is built around our regulatory system, but as you 
pointed out, our enforcement authority becomes very important. 
We brought a number of cases against large commodity traders 
for position limit violations last year, and it is actions like 
those that I think remove bad actors and speculative activity, 
which drives prices outside of supply demand range.
    We will continue to focus on ensuring markets are 
reflective of price discovery because this affects cash prices 
at grain elevators across the country. They are looking to our 
markets to price their goods as they sell them to ship overseas 
or domestically, and we have to ensure those prices are fair, 
transparent, and reflective of supply and demand.
    Senator Klobuchar. Thank you very much. I appreciate it.
    Chairwoman Stabenow. Thank you so much. Senator Ernst.
    Senator Ernst. Thank you. I am tagging in here at the end. 
I appreciate it. We have had a busy morning. I really 
appreciate you being here today, and I will keep it very brief.
    I do a lot of visits across the State of Iowa and visit 
with farmers and stakeholders, and there is a huge interest 
from the public and private entities to address carbon 
reduction. If you could address this. Is there a role for 
derivative markets to facilitate carbon reduction and the risks 
associated for those individuals?
    Mr. Behnam. Thank you, Senator. It is an important question 
because I think as we have discussed carbon markets have been 
emerging and growing over the past couple of years, both on the 
compliance side, which is more related to a cap-and-trade 
program, but also more importantly on the voluntary side. I 
think this actually creates a huge opportunity for landowners, 
including farmers and ranchers in Iowa, to create a new revenue 
stream for themselves by sequestering carbon through a number 
of techniques. Ultimately by sequestering carbon they are going 
to generate an offset and they are going to sell those offsets.
    I think that is where the CFTC comes into play, because 
essentially what you are creating is a marketplace, and we need 
to ensure that marketplace has integrity, has transparency, and 
that the price discovery function is existing in an appropriate 
manner. The derivatives market plays an extremely important 
role on top of that cash market to enable farmers and ranchers 
and other producers to hedge risks associated with the 
volatility in those prices.
    We are working with the authority we have, which is 
limited, but we are working with that authority to ensure those 
components are enshrined.
    Senator Ernst. Well, I really appreciate it. We just did a 
roundtable on Title II conservation for the farm bill. I did 
that in Iowa this last weekend. And people are really, really 
excited about this opportunity. I appreciate your attention to 
it, and we look forward to working on that in the upcoming farm 
bill.
    Thank you. Thank you, Madam Chair.
    Chairwoman Stabenow. Thank you. Absolutely.
    Let me turn to Senator Durbin.
    Senator Durbin. Thank you, Senator Stabenow, and Mr. 
Behnam, thank you for returning to the Committee. The CFTC 
responsibility over the futures industry of Chicago is a very 
important consideration, and I commend you for the work that 
you have done and believe that you have helped to establish the 
integrity of their operation, which is respected on a global 
basis.
    Let me say that I do not believe that we have shown an 
adequate concern for this same issue. Since 2006, CFTC has only 
been funded at its requested level twice--$304 million in 
Fiscal Year 2021, $365 million in Fiscal Year 2023. Last year, 
CFTC estimated it needed approximately $127 million in 
additional funding to effectively oversee the digital asset 
market. That is 33 percent of your annual budget.
    For the record, in Fiscal Year 2022, the CFTC imposed more 
than $2.5 billion in restitution, disgorgement, and penalties. 
It is not as if you are not doing your job and the Treasury is 
better for it. I think that is a reality.
    The issue that I want to speak to is one that we have 
discussed before. When you were last before the Committee in 
December, the crypto industry was cascading in the dirt. We had 
just witnessed the stunning collapse of FTX, a company that was 
less than three years from its founding, supposedly worth $32 
billion, 1 million users, and it collapsed overnight.
    Since then, CFTC, SEC, and DOJ have announced charges 
related to the collapse. I commend them.
    The cat is out of the bag that I have been skeptical of 
this crypto mania from the start. At one of the committees last 
year I warned about the contagion and risk if crypto was more 
fully integrated into the broader financial market. I asked you 
in December how long it was going to take to unpack the FTX 
mess, being able to understand exactly what happened. The 
sooner we shine the spotlight on what happened to FTX, the full 
extent of the scope of the failure, the better.
    How much closer, Mr. Chairman, are we to getting to the 
bottom of what happened with FTX?
    Mr. Behnam. Thank you, Senator. I would unfortunately have 
to say that as you pointed out there is open litigation at both 
the civil and criminal level by the SEC, CFTC, and the Justice 
Department. We are working diligently. We are working as 
quickly as possible in trying to unpack all the facts that are 
coming to us.
    More to come, but we are going to do it cautiously and 
slowly so that we can get it right, and all charges are going 
to be addressed appropriately.
    Senator Durbin. Well, I understand that. Despite the 
indictments and the legal charges that have been filed by these 
different Federal agencies, the crypto industry is on full 
steam ahead. Hard-working Americans are taking financial advice 
from investment advisors like Matt Damon, Larry David, and Tom 
Brady. Crypto firms are applying for accounts at the Federal 
Reserve. Trusted names in the retirement industry are offering 
exposure to Bitcoin in 401(k) plans.
    The industry argues that the FTX collapse was an anomaly. I 
do not believe it. What do you think?
    Mr. Behnam. Senator, I think it supports my argument, and 
many of the arguments that have been made by this Committee and 
members of this Committee that we need comprehensive 
regulation. I do not believe that the technology is going to go 
away. I do not believe that the trading markets--and that is 
the component that is most important to me, as a market 
regulator--are going to go away. I think that we have to think 
very carefully but aggressively about comprehensive regulations 
so that we can do the best we can to avoid another collapse.
    Senator Durbin. This horse is out of the barn.
    Mr. Behnam. Correct.
    Senator Durbin. The crypto industry, financial regulators 
have highlighted a laundry list of risks associated with them: 
fraud, comingling of funds, lack of disclosure, high 
volatility, interconnectedness in the industry, conflicts of 
interest, lack of basic governance, practices, and risk 
control. It is abundantly clear when it comes to crypto we need 
real cops on the beat and we need them now.
    There is a plea that has been made by the SEC for some 
authority and jurisdiction in this area, and I am listening to 
their request. I do not know that we can respond quickly enough 
to avert any further disasters in this industry, but I tell 
you, at this point those of us who were skeptical are becoming 
convinced: crypto is a dangerous investment, dangerous for 
everyone, and the American government, at this point, is not 
doing its job in regulation.
    Thank you, Mr. Chairman.
    Mr. Behnam. Thank you, Senator.
    Senator Boozman. [Presiding.] Thank you, Senator Durbin. 
Why don't we go to Senator Gillibrand?
    Senator Gillibrand. Thank you, Chairman Behnam. I really 
appreciate your statement that you believe it is time for 
comprehensive regulation. As you know, I have taken the time to 
write a bill with Senator Lummis to provide that comprehensive 
framework.
    I would like your assessment of that draft. We are doing a 
new draft that will be released mid-April, but our ambition is 
to make sure there is a place to start a national conversation 
about a holistic approach to digital assets, to make sure that 
digital assets have the character of securities, are regulated 
by the SEC, to have the assets that have the indicia of 
commodities are regulated by the CFTC, to make sure stablecoins 
can be overseen by the OCC, to make sure that there are tax 
provisions for the entire industry, to make sure there are 
cybersecurity requirements for every part of the industry.
    I would like your assessment of the direction of that bill 
and ways that we can continue to improve upon it. You and I 
have met about this, but I would like your insight for the 
record, because before we introduce the new version of this 
bill I would like your thoughts. Thank you.
    Mr. Behnam. Thanks, Senator. As you point out, and I said 
this, I remember, months ago at an event, what was most 
important to me in terms of the success of your bill with 
Senator Lummis, and getting it out there, is really pushing the 
conversation. Because naturally the bill will get amended and 
get pushed in different directions, but I thought you very 
carefully and thoughtfully considered all components of the 
market, not just something that obviously resonates with me as 
a market regulator on the market side, but thinking about the 
stablecoin issues, thinking about settlement, thinking about 
custody, thinking about cybersecurity risks. Comprehensive in 
that nature.
    I think given what we experienced and what we saw with FTX, 
a premium on obviously segregation of assets, on customer 
conflicts of interest and ensuring that those conflicts are 
rolled off very carefully. I think there are different 
questions that we probably have to ask in many respects with 
respect to digital assets in light of cybersecurity, vendor 
risk, third-party service providers.
    I would just emphasize those are some components that might 
be worth looking at or taking a second look to ensure that we 
do not run into another situation like we did a few months ago.
    Senator Gillibrand. Thank you. In light of Chairman 
Gensler's recent suggestion that all digital assets except for 
Bitcoin are securities, what does that mean for a number of 
designated contract markets currently offering futures or swaps 
on Ether?
    Mr. Behnam. Well, it would obviously raise questions about 
the legality of those DCMs, designated contract markets, 
listing these digital assets that are purported to be 
securities.
    I have made the argument that Ether is a commodity. It has 
been listed on CFTC exchanges for quite some time. For that 
reason it creates a very direct jurisdictional hook for us to 
police, obviously, the derivatives market but also the 
underlying market as well.
    Senator Gillibrand. As a regulator how do you respond to 
such a position given that the SEC interprets the Federal 
securities law. If there is this competition for oversight, 
what tools do you have to respond to that, given that you have 
been having oversight over Ether under the commodities market?
    Mr. Behnam. Yes. Senator, it is an important question 
because the process for which an exchange or DCM, as you 
pointed out, will list a contract is very clear under our law. 
They could seek approval by the Commission or they could self-
certify a product. That self-certification process is one that 
shifts the responsibility to both the CFTC and the market 
participant, and I would say serious and deep legal analysis 
goes into the thought process before a product is self-
certified.
    There is no doubt in my mind, and having known this and 
been at the Commission when Ether futures were listed, that 
both the Exchange and the Commission thought very deeply and 
thoughtfully about what is the product and does it fall within 
the regime, the commodity regime or the security regime. We 
would not have allowed the product, in this case the Ether 
futures product, to be listed on a CFTC exchange if we did not 
feel strongly that it was a commodity asset, because we have 
litigation risk, we have agency credibility risk if we do 
something like that without serious legal defense or defenses 
to sort of support our argument that that asset is a commodity.
    Senator Gillibrand. Thank you. With regard to Chairman 
Gensler's position for CFTC's 2021 settlement with Tether, the 
undertakings of which I presume you are still monitoring, so 
how do you address those kinds of issues?
    Mr. Behnam. Again, Senator, in speaking about stablecoins 
themselves--because there is a larger question about what 
direction stablecoins should go in terms regulation, and as you 
pointed out in the bill that you co-drafted with Senator 
Lummis, and I agree with this, that stablecoins are and should 
be prudentially regulated financial instruments--
notwithstanding a regulatory framework around stablecoins, they 
are going to be commodities, in my view.
    I know colleagues might have a different opinion, but we 
have done the legal analysis, and examining the circumstances 
around the Tether case it was clear to our enforcement team and 
the Commission that Tether stablecoin was a commodity and we 
needed to move forward and swiftly to police that market and 
that company.
    Senator Gillibrand. Thank you. Thank you, Mr. Chairman.
    Senator Boozman. Thank you. I am going to go ahead. I have 
skipped out of the order so I am going to go ahead, since I 
have not voted, and then we will get back, if that is okay. 
Chairman Behnam, again, thank you for being here.
    Critics, in a derogatory way, have accused the CFTC of 
having a, quote, ``light touch'' while ignoring the fact that 
the futures market has withstood the market shocks of the last 
few years better than any other markets. Why is the CFTC's 
principle-based regulatory framework the gold standard in terms 
of fostering market resiliency, and how has the agency shown an 
ability to protect market participants?
    Mr. Behnam. Thanks, Senator. Just briefly to sort of 
address your question, you use the word ``critics'' and 
obviously with critics comes criticism and that is natural. I 
accept that responsibility as chair of an agency. I signed up 
for it. When I think about that word, ``critic'' and criticism, 
I think about democracy. I think about sort of the friction of 
ideas, different ideas banging against each other. I think we 
all have a mutual understanding that criticism is healthy. It 
is good because it leads to, hopefully, better outcomes. It is 
what we do at the Commission, it is what this Committee does, 
and it is what this body does.
    To your point, a lot of what has been thrown at us I would 
not actually give it the credit of calling it criticism. It is 
nonsense, quite frankly, and I think our record demonstrates 
why, under a principles-based approach, that has very 
prescriptive rules built on top of those principles. We are a 
very effective, a very efficient, and a very impactful agency. 
It is the farthest thing to suggest that the CFTC is a light-
touch regulator. Our enforcement record demonstrates that, and 
I think some numbers have been thrown around over the past hour 
about our record on assessing penalties, multiple times the 
size of our funding levels.
    In terms of market structure and what we have been through 
over the past couple of years, you know, historical volatility 
in commodity markets across agriculture, energy, metals, and 
financials, and the CFTC markets and CFTC clearing system has 
withstood that pressure admirably and, quite frankly, very 
successfully. I think market participants across the globe 
recognize that.
    Last I will point, on top of that, market structure. I 
think you and I had this discussion in the past. If you think 
about 2008 and the financial crisis, the one marketplace that 
was essentially salvageable was the cleared derivatives market, 
and that was used as a framework for the swaps market 
regulatory regime that was put in place after 2010. The flash 
crash that we saw and some of the issues around price bans, 
these were, we were implemented in different parts of the 
equity market as well.
    I would just say, also thinking about the Treasury market, 
Treasury market reform is happening right now. They are looking 
at derivatives markets as a model.
    We continue to be used as a model, and I think that is a 
clear signal that our markets are working well, are impactful, 
effective, and very resilient.
    Senator Boozman. Good. No, I agree, and I think, 
importantly, the record shows that. That is really the key.
    Thank you for your insight on the regulatory work the 
agency is doing. The CFTC finalized its block trade reporting 
thresholds. Will you talk about making sure they are well 
calibrated to avoid unintended consequences for liquidity and 
increased transaction costs.
    Mr. Behnam. Thank you, Senator. I will absolutely make that 
commitment to make sure that we are constantly evaluating both 
the block thresholds and the reporting requirements. Just very 
quickly to share with you, it is a delicate balance but one 
that we will tackle on head first, to ensure that the 
incentives remain for participants to trade and to create 
liquidity for these markets, but also to make sure that we are 
ensuring equal access and transparency in markets.
    We will constantly look at the data on a backward-looking 
basis, to ensure that we are modifying and calibrating both the 
block threshold and the reporting requirements, as appropriate.
    Senator Boozman. Very quickly, swap markets are global, and 
I have been hearing about ongoing issues with U.S. customer 
access to these markets. Will you and your commissioners 
consider a rulemaking or other regulatory solution that 
provides U.S. customers with greater access to non-U.S. swap 
markets, and can you provide maybe a little bit of a path 
forward?
    Mr. Behnam. Thanks, Senator. Yes, we certainly understand 
that U.S. customers need the ability to hedge on a global 
basis, and different jurisdictions across the globe provide 
different products that are more suitable, depending on the 
business of a commercial end user or a client. We do consider 
it, and I will commit to you to make sure that I, myself, will 
talk with my fellow commissioners to make sure that we are also 
and always considering applications for more access for U.S. 
customers.
    I would say, as one note of caution in the way I think 
about these things is to ensure fair access and U.S. customer 
availability to global markets it is important that bankruptcy 
protections are preserved. When you start allowing U.S. 
customers to trade on non-U.S. markets there can always be a 
risk of bankruptcy protections in the bankruptcy regime of the 
non-U.S. market. I think we care deeply about making sure U.S. 
customers reserve that bankruptcy protection that is so 
important to the U.S. market. Then reciprocity. I think it is 
important, as we consider access to non-U.S. markets that the 
jurisdictions that were allowing to offer these services to 
U.S. markets also allow their citizens to access U.S. markets. 
Those are a few of the things that we will consider in the 
process.
    Senator Boozman. Good. Thank you.
    In closing, this is not a question. I appreciate how your 
staff is being transparent with us regarding pausing the 
commitment of traders issue. I have heard about it from 
Arkansans, so I will have some questions for the record for 
that. Senator Braun.
    Senator Braun. Thank you, Mr. Chairman. Good morning, Mr. 
Behnam.
    I believe Congress should be smart on the entire discussion 
of climate, including Republicans. To this end, I co-founded 
the Climate Caucus, and we also got through a bill, Growing 
Climate Solutions Act, with the help of Senator Boozman and 
many others. I think that is an issue that if we are not 
involved with it, we will regret because many different sectors 
of even our supporters want us to be attentive to it.
    I am concerned, though, with the SEC's decision to maybe 
shoehorn climate into its materiality standard for financial 
risk disclosure. We have several Federal agencies who are 
tasked with addressing the climate, and I do not think the SEC 
should be one of them. I am working with Ranking Member Boozman 
to introduce a Protect Farmers From the SEC Act. Farmers are 
not privately traded companies. As hard as their jobs are, the 
least we can do is keep the SEC from knocking the doors down on 
this.
    You have been involved with CFTC with studying the role 
derivatives may play in understanding, pricing, and addressing 
climate-related risk and transitioning to a low-carbon economy, 
all valid, I think, considerations. Congress has not given the 
CFTC the authority to help transition to a lower-carbon 
economy.
    Can you commit to wait for clear congressional 
authorization before adding climate change to the CFTC's 
portfolio?
    Mr. Behnam. Yes, sir.
    Senator Braun. Any addition answer other than yes?
    Mr. Behnam. Senator, of course. I live within the bounds of 
the Commodity Exchange Act. I know that, I respect that, and I 
think that is just the most important responsibility of the 
head of an agency.
    That said, yes, I have taken a number of steps to ensure 
that the agency is engaging with the private market, to ensure 
that we are, from a market perspective, facilitating the 
development of new, innovative products that can help mitigate 
climate risk. The derivatives market, in my view, because a 
central focal point in the transition to a low-carbon economy, 
because whether it is a large Indiana manufacturer, an 
agricultural producer, or a global financial institution, 
mitigating risk through credit, through foreign currency, 
through rates really drives back to the CFTC's derivatives 
market.
    Ensuring that we are thinking about how climate change is 
impacting markets and how derivatives products are priced off 
of that risk or that climate alteration, or how they can be 
used as a tool I think is important. Everything we do will be 
within the bounds of the Commodity Exchange Act, but I do think 
that we have to be forward thinking and aggressive in 
supporting market-based initiatives to support the development 
of our markets.
    Senator Braun. Thank you. During your nomination hearing 
nearly 1 1/2 years ago we discussed the issue of 
reauthorization. As we discussed then, authorization for the 
CFTC lapsed at the end of Fiscal Year 2013, a long time ago. 
Since then, for a decade, your agency has operated as an 
unauthorized appropriation.
    In addition to serving as an important step in the 
legislative process, congressional debates over 
reauthorizations also contribute to the oversight and reform 
processes. For example, last year you testified before this 
Committee three times about additional statutory authorities 
you believe CFTC needs to regulate digital assets. There are 
also CFTC priorities like we just discussed that do not have 
backing in a statute, climate risk, for instance. This is not 
CFTC's fault, of course. My colleagues and I have shirked off 
our responsibility, leaving agency rulemaking to fill the 
vacuum. While this is a dereliction of our duty as Senators, it 
also leads to unchecked administrative growth.
    I do not really have a question here for you, but my ask, 
colleagues, is really to them, to think critically about the 
risk of giving up Congress' sacred oversight and 
reauthorization authorities and do our job. I am guessing you 
probably agree with that tool.
    Mr. Behnam. I do, sir.
    Senator Braun. Thank you.
    Chairwoman Stabenow. [Presiding.] Thank you very much. 
Senator Grassley.
    Senator Grassley. Thank you, Madam Chairman, and thank you, 
Commissioner, for being with us.
    I am pleased that you noted in your testimony about the 
Whistleblower Program being successful. Whistleblowers are 
essential to helping the agency root out wrongdoing in the 
commodity trading industry and returning billions of dollars to 
the taxpayers. As one of the Senators who led the original 
effort to establish the program in 2010, the program has 
accomplished much. However, in many ways it has, at times, 
become a victim of its own success. Due to the effects in the 
way that the CFTC whistleblower fund is set up, there may not 
always be sufficient funds to pay whistleblower awards.
    Last Congress I got passed into law a short-term fix to 
keep it going. The law ensures that the CFTC program continues 
to function even when expenses exceed the program's fund 
balance. There should be a more permanent fix.
    My question to you is, if Congress is not able to pass a 
longer-term solution to the Whistleblower Office it will reduce 
the effectiveness of the agency's enforcement efforts. Do you 
support a permanent extension of the CFTC Fund Management Act, 
and if not, why not?
    Mr. Behnam. Senator, thank you for the question. I 
wholeheartedly support a permanent fix, and I thank you for 
your leadership in taking steps toward fixing that. As you 
point out, the success of the program has been its biggest 
weakness because we have been able to pay out huge sums of 
money because of whistleblowers and because of the 
effectiveness and the strength and the expertise of our 
enforcement program. I have no reason to believe that that 
success will not continue in the future.
    Because of that continued success we run the risk of that 
fund being depleted quicker than it can be restored. What that 
really does then is put at risk both the Whistleblower Office 
and our Office of Customer Education and Outreach, which are 
two critical components of what the CFTC does to protect 
investors, to get information out to investors about the risks 
associated with our market.
    A permanent fix would be extremely welcome and I think 
would continue the longstanding success of both the 
Whistleblower Program but the CFTC's enforcement program as 
well.
    Senator Grassley. I think may have answered part of my next 
question, but I think I am going to ask it anyway, and there 
might be something you can fill in. In your testimony, you 
mentioned that the amendments to the statutory provision 
described the permitted uses of the customer protection fund 
would allow for a new program so that Americans have the 
knowledge and tools to protect themselves from fraud. Can you 
elaborate more on the new programs you are envisioning if such 
amendments occur?
    Mr. Behnam. Thank you, Senator. It is a very important 
question and I was very intentional in including it in my 
testimony because currently, and putting aside the limitations 
of the funding mechanism, our Office of Customer Education and 
Outreach is limited to using the funds for fraud or 
manipulation, which are extremely important because it gives us 
a tool to share information with the broader public about 
potential fraud or manipulation.
    However, what we have seen over the past decade or so is 
that there are a lot of new and additional tools that can be 
focused on education and advocacy, which are not clearly 
defined within fraud and manipulation, that I think would 
benefit from an expansion in that authority through statute.
    With that expansion, and to the Chairwoman's point about a 
growing retail participation in our market, expanding that 
remit from just fraud and manipulation to education and 
advocacy would allow us to use these funds to do more boots-on-
the-ground advocacy with local groups, and I have said this in 
the past, with VFWs, AARP, State regulators, to just make sure 
folks understand the risks associated with CFTC markets.
    Senator Grassley. I think my last question I am going to 
submit for the record because I have got to get over and vote 
on this issue. Thank you, Mr. Commissioner.
    Chairwoman Stabenow. Well, thank you very much, Senator 
Grassley. Senator Hoeven.
    Senator Hoeven. Thank you, Madam Chair. I appreciate it. 
Chairman Behnam, thanks for being here. Good to see you. I 
appreciate it.
    Our farmers are facing just a whole myriad of challenges 
nowadays, including volatile markets and prices. Obviously, one 
of the things they do to try to manage that price risk in the 
market is to hedge their crop. Incredibly important to them, 
and it is becoming more important. It is sophisticated, it is 
challenging, but certainly in my State, and I think many 
others, there is a significant amount of hedging they do every 
year with their crops and a lot of times their financial 
institutions require them to do it.
    What are you doing, what can you do to help make it easier 
for our farmers and ranchers to use that critically important 
tool?
    Mr. Behnam. Thanks, Senator. I am going to give you a quick 
anecdote. I mentioned this earlier. I sponsor or run the 
Agricultural Advisory Committee. We had a meeting in December, 
and I asked the group, ``What should we talk about and what 
should we examine?'' A few things came up. One was shipping 
issues and issues around the Mississippi and water levels. 
Another issue that came up was access to brokers, essentially 
our FCMs, our futures commission merchants.
    I mentioned this earlier to Senator Klobuchar. We have seen 
a fair amount of concentration in the market, and this is, I 
think, a product of the 2008 reforms after the financial 
crisis. What happens when you see concentration in any market, 
the smaller or mid-sized firms tend to go away and they end up 
being larger firms. I think that has the most impact on small 
and mid-sized agricultural companies and farmers and ranchers.
    What we can do, I think, is constantly look at our rules 
and regulations to make sure that markets remain resilient and 
strong and cost-effective, which we do consistently, to make 
sure that farmers and ranchers consistently think of them as a 
risk management tool. Ultimately, my goal over the next few 
years is to have a larger conversation about what is the 
clearing and what is the risk management and derivatives 
ecosystem looking like and does a farmer in North Dakota feel 
like they can use the futures market as another risk management 
tool on top of crop insurance, on top of commodity programs 
that are provided by the USDA.
    We will keep thinking about those things, engaging, 
traveling, visiting, and just listening to folks to make sure 
that we are doing what we should and doing what we can, the 
best that we can.
    Senator Hoeven. Yes, and you hit the nail on the head. That 
is really important. I mean, they use crop insurance, they use 
the countercyclical safety net, and they use your programs to 
really at least lock in enough to make sure that they can get 
from 1 year to the next, and then how profitable they may be 
for that year is dictated by a lot of the things, crop 
conditions and weather and markets, and so forth, prices.
    Obviously, one of the things we will be working on in the 
next farm bill is how farmers can benefit from carbon capture. 
The Chairwoman and the Ranking Member have legislation on this. 
It is clearly going to be under significant discussion as part 
of the next farm bill. It is my opinion that that should not be 
a large federally funded government program, but instead USDA 
can play a role in setting parameters and so forth and then you 
have the private markets decide what they buy and how they want 
to interact in that area, and producers can respond to it, and 
hopefully there is a revenue opportunity for them there.
    What role can you play in making that happen?
    Mr. Behnam. Senator, everything you just described, in my 
view and from my seat as the chair of a market regulator, leads 
to a market developing, because we can set the program, we can 
incentivize the activity, and then if a North Dakota farmer is 
able to sequester carbon, as I mentioned earlier to Senator 
Ernst, you are then generating an offset because of that 
sequestered carbon. In many circumstances that offset will be 
retired, but in many circumstances that offset will be traded. 
This is not unlike the RINs market, which is a byproduct of the 
renewable fuel standard policy.
    I just think it is critically important, as this Committee 
and body continues to think about the benefits of a carbon 
market, a market-driven carbon market, to not forget that you 
are creating a marketplace, with buyers and sellers. As I 
experienced with the RFS RINs market, when you create a market 
you are creating a place that is susceptible to fraud and 
manipulation. We are a commodity market regulator. We stand 
ready to participate, to help, to lift the integrity of this 
market, and to create a venue where farmers can feel 
comfortable that what they are doing is generating a price that 
is adequate and appropriate for the work that they have done.
    Senator Hoeven. Madam Chair, I beg your indulgence for one 
more? That goes to the user fees. There has been a point of 
discussion, previous budget request, there has been a request 
for CFTC to implement user fees.
    Now we have increased funding--and as you know I work on Ag 
Approp, and the Ranking Member there--we have increased the 
approps from about $63 million to about $250 million since 
2002, so that is a substantial increase. My concern with user 
fees, again, are farmers and ranchers being able to access the 
markets on a cost-effective basis. I have concerns about that.
    Mr. Behnam. Senator, I appreciate that concern, and 
certainly we would not--and this goes to your first question 
about creating incentives or disincentives to participate in 
our market. We would not want to create an unnecessary cost on 
the end user community to participate in our markets. That 
said, I would say over that period of time that you just 
identified, about 20 years, derivatives markets have changed 
tremendously. We have not only started regulating the OTC swaps 
market, which is now regulated, but we have seen exponential 
growth in the futures and options market, and then we are 
having to police crypto markets and other areas.
    We had a period in the 2010's where we were largely flat 
funded, and I say that with a little caution because we did go 
up a bit. As Chairman right now, I am feeling that impact. Flat 
funding an organization, private or public, for a series of 
years, three, four, five, has long-term impacts on morale, on 
attrition, and on recruitment. We are trying to recover from 
that because Congress has been very gracious in increasing our 
funding over the last few years, and we hope that continues 
because there should be a recognition of the importance of the 
agency and the work that it does for Americans.
    Senator Hoeven. Yes, and I do understand that, and we are 
going to be resource constrained. The Chairwoman and I were 
just talking about the challenge of the farm bill. I get that 
part of it too, that you have to have the resources to do your 
job. That is very important.
    Mr. Behnam. Thank you.
    Chairwoman Stabenow. Thank you very much. Senator Welch.
    Senator Welch. Thank you, Madam Chair, and I understand Mr. 
Behnam is coming home here.
    Chairwoman Stabenow. That is correct.
    Senator Welch. Well, welcome.
    I wanted to ask a little bit about the carbon offsets and 
whether they are working. There is an enormous boom in recent 
years with those carbon offsets being increased to about $1 
billion in 2021, probably higher in 2022, and many of the 
world's largest corporations, and also the biggest carbon 
emitters, are allocating significant resources, as you know, 
toward purchasing these offsets to meet net zero goals.
    It is unclear to me, and I think a lot of folks, whether 
they are working on the goal of reducing carbon emissions as 
opposed to the cosmetic appearance that an effort is being made 
to do that, and give a talking point or bragging point for 
companies that probably want to do the right things, but does 
this work.
    Has the spike in the carbon offset market that has taken 
place over the past few years actually had a tangible impact on 
climate change mitigation, i.e., carbon reduction?
    Mr. Behnam. Senator, you know, it is an extremely important 
question and something that I think about because ultimately 
when I think about the voluntary carbon markets and these 
markets that are developing--I was just speaking about this 
with Senator Hoeven--my role as a market regulator and 
observing the fact that markets are developing and that 
customers are participating in these markets, where the 
underlying asset that is being traded is a commodity. I think 
that directly implicates the CFTC, not only because it is a 
commodity asset, but as I pointed out earlier as well, on CFTC-
regulated exchanges there are carbon offset futures contracts. 
Once you have futures contracts on CFTC markets, the market 
then becomes jurisdictional to us, both the derivatives market 
and the underlying cash market, the offsets themselves, because 
that fraud and manipulation is almost fungible between the cash 
market and the futures market.
    All that to be said, your question is important because it 
talks about the integrity of these markets, and whether or not 
a carbon registry, which is arguing that we are sequestering X 
tons of carbon by planting 10,000 acres of trees, are you 
really sequestering that carbon because of new plantings? Is 
there--``additionality'' is a term often used. I have to be 
very cautious and honest that we are a market regulator. We are 
not an environmental regulator.
    Senator Welch. That is helpful, I mean, because bottom 
line, these were created for the goal of carbon reduction. If 
we have got a market that is its own internal organ that can 
sustain itself but it does not actually achieve the stated goal 
for which it was created, we need to know that. What I am 
hearing you say is it is not your job, at the CFTC, to figure 
out whether the market is actually effective in achieving the 
goal.
    Mr. Behnam. Senator, yes, absolutely. We are a market 
regulator. We do not have the personnel or the expertise to 
evaluate whether or not a project is actually sequestering X 
amount of carbon.
    Senator Welch. Madam Chair, that is really important to 
know, because we have got this fiction out there, that is 
unexamined, and I think all of us need to know whether this is 
just a market where people are moving money around and 
essentially speculating as opposed to some market that is 
actually achieving a stated goal of carbon reduction.
    How do we deal with that?
    Mr. Behnam. Senator, there are a number of private sector 
initiatives that are underway. The ICVCM is coming out with 
core carbon principles, and this is an industry-led effort to 
ensure a minimum set of standards and principles around the 
integrity of the carbon markets to ensure exactly what you are 
pointing out, that the advertised sequestration is actually 
occurring. I do think there are other roles for other agencies 
that have different areas of expertise.
    Senator Welch. I do not know if this is a fair question, 
but would it be something where you could give us a 
recommendation of two or three things that we would have to do 
in order to satisfy folks that, in fact, the market is reducing 
carbon emissions or it is not?
    Mr. Behnam. Absolutely. I am happy to. I would say I want 
to be very clear that I do not think the CFTC should be boots 
on the ground in examining a project to sequester carbon, but 
if a carbon registry is advertising the sequestration of some 
amount of carbon and then selling that offset to a consumer, 
that in itself is sale, potentially, under some legal analysis, 
of a commodity asset, and then that is where the CFTC could 
come in because you have that relationship between a potential 
fraudulent sale of a carbon offset and the impact it might have 
on our jurisdictional markets.
    Senator Welch. Thank you very much. My time is up. I would 
like to followup with you. I think it is an important question 
for all of us. Madam Chair, I yield back, and thank you for 
your consideration.
    Chairwoman Stabenow. Well, thank you, Senator, and let me 
also, just to add to this, particularly in agriculture, next 
week, next Thursday, we will have Secretary Vilsack with us, 
and I think this is an important area to discuss with him, 
because at the end of the year we did pass the Growing Climate 
Solutions Act, which gives them the authority and 
responsibility to develop the technical expertise to be able to 
measure carbon reductions in agriculture with integrity. 
Because you are exactly right, and we have to know its real 
reductions--there is integrity in the markets--and I think 
farmers want to know that as well.
    In that piece, not energy markets and other things, but in 
the agriculture piece we have now given the authority to USDA 
to really develop that expertise to measure what is a credible 
carbon reduction and integrity. Thank you so much for raising 
that, and we need to have further discussion.
    On that note I want to thank Chairman Behnam for joining us 
again today. We so much appreciate your leadership, the 
leadership of the Commission in so many ways, and I am looking 
forward to working with you as we move forward on the issues of 
the Commodity Exchange Act and the agency's funding. We want to 
make sure that you are keeping pace with evolving markets on 
both fronts. It is a very important agency for our economy and 
for those in the agriculture space.
    Thank you for joining us. We will keep the record open for 
five days, and the meeting is adjourned.

    [Whereupon, at 11:36 a.m., the hearing was adjourned.]

      
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