White collar crime: Former federal attorneys talk agency changes, prediction market litigation at NYC Bar Association | amNewYork

"Because the derivatives market regulatory agency's staff has been significantly cut under President Trump, companies facing certain investigations may face a less strict hand, especially if they choose to self-report a problem. You know that personnel is limited, said former CFTC enforcement director Ian McGinley. I think that is good data to have when you're advising clients on whether to self-report. For violations that are not really heartland priorities, it actually weighs in favor of going to [the government] on it."

"McGinley said the agency's heartland priorities seemed most focused on fraud, manipulation and insider trading cases, and less on more technical, registration cases, like those related to data reporting. It's those on cases, he said, that lawyers representing large companies may want to take into consideration that the agency is less focused on them than it was before. Since there are fewer enforcement attorneys working there now, he suggested that could impact their strategy when addressing issues."

"Obviously, it's going to depend on a particular case, McGinley said. But that's not kind of what the kind of case they want to bring, and if you have clients that want to put matters behind them, right, it is a pretty good time for that [self-reporting]. A hot-button issue for the agency now is the legal battle playing out over whether prediction markets are gambling platforms operating illegally without state gaming licenses, or a form of derivative market that should be overseen by the CFTC, and therefore allowed to operate without state gaming licenses."

Former CFTC enforcement directors warned that reduced staffing at the derivatives regulator can lessen enforcement intensity, particularly for matters that fall outside core “heartland” priorities. They said limited personnel affects how companies evaluate whether to self-report, since non-heartland violations may receive less aggressive attention. The focus was described as strongest on fraud, manipulation, and insider trading, with comparatively less emphasis on technical registration and data-reporting issues. With fewer enforcement attorneys, lawyers for large companies may adjust their approach when addressing potential problems. The CFTC’s priorities also intersect with ongoing legal disputes over whether prediction markets are illegal gambling requiring state licenses or derivatives that the CFTC can regulate without those licenses.

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