Source: US Commodity Futures Trading Commission
It has been an honor and privilege to serve as a Commissioner at the Commodity Futures Trading Commission (CFTC). Having completed my full term, I have notified the President of my intent to step down as a CFTC Commissioner later this year. Although this is a difficult decision, I am proud of the work that I have accomplished and am deeply grateful for the chance to develop meaningful relationships with staff and current and former Commissioners during my tenure at the CFTC.
I am exceptionally fortunate to have had the opportunity to serve our great nation and am honored that President Joseph R. Biden nominated me to serve in two critical roles as a financial market regulator. In addition to nominating me to serve a three-year term as a CFTC Commissioner in the fall of 2021, last summer, President Biden nominated me to serve as Assistant Secretary for Financial Institutions at the United States Department of the Treasury.
As a graduate of Georgetown University’s Walsh School of Foreign Service, the invitation to return to Washington, D.C. as a CFTC Commissioner resonated with my life-long commitment to be “in service of others.” When I accepted the nomination to serve as a CFTC Commissioner, I requested a three-year leave of absence from Emory University School of Law where I serve as Asa Griggs Candler Professor of Law. On March 28, 2022, I was unanimously confirmed by the United States Senate. On March 30, 2022, not long after teaching my last class for the semester at Emory Law School, I was sworn in to serve as a CFTC Commissioner.
This year marks the 50th Anniversary of the CFTC, a small-but-mighty agency that works daily to advance effective supervision and oversight in derivatives markets. In 1974, Congress passed and Former President Gerald Ford[1] signed into law the Commodity Futures Trading Commission Act creating the CFTC. A few months later, on April 15, 1975, four of the first five Commissioners, including the first Chairman of the Commission, were sworn in to service.
As the Commission celebrates this important milestone, I celebrated my third anniversary at the Commission. A few days after my third anniversary, my term expired.
Our derivatives markets operate as a critical resource for price discovery, risk management, and hedging functions for many sectors in our economy but, most notably, the agriculture, energy, and financial services sectors. One of the greatest strengths of our federal government and, more specifically, the federal agencies that supervise many of the largest global financial market participants in the world, is the intellectual leadership of our regulators.[2] Over the last several decades significant events have tested the resilience of our markets. In each instance, the Commission and its regulations developed through robust engagement among the Commissioners—with the support of the Commission staff—have served to address liquidity and default risk management concerns and to enhance the integrity and stability of our derivatives markets.
I have endeavored to support the Commission’s work through constructive, substantive engagement with my fellow Commissioners, Commission staff, and the diverse businesses that we supervise. I am deeply committed to encouraging the Commission to develop well-informed, research-based, data-driven regulatory solutions that are well-tailored and fit-for-purpose. Thoughtful, effective regulation ensures that our markets are resilient even during periods of significant or persistent challenges.
It has been a privilege to serve alongside my fellow Commissioners and to have had the opportunity to work with the exceptional and indefatigable staff at the Commission. The Commission staff works tirelessly to support the Commission in tackling complex and consequential issues through careful and thoughtful deliberative processes. I am confident that the Commission will continue to do important work protecting investors and customers, combatting fraud and market manipulation, and ensuring market integrity and stability.
A Survey of Service
Serving in leadership at the Commission, I have enjoyed driving intellectual and policy developments on several critical issues facing our markets. I led the Commission by advancing proposed and final rules that enhance risk management for derivatives clearing organizations (DCOs), cyber-resilience, and effective recovery, resilience, and wind-down regulations.
I have strongly advocated for careful reflection regarding the integration of artificial intelligence (AI) in financial markets and advocated for a number of policies and strategies to enhance the Commission’s ability to better understand industry integration of AI, including information gathering; the creation of an inter-agency task force encouraging domestic and international harmonization and collaboration on guidance or policies addressing the adoption of AI; the creation of a CFTC AI Fraud and Market Manipulation Task Force; and efforts to ensure sufficient human capital and financial resources to enable the Commission staff to keep pace with rapidly-evolving AI technologies.
In the wake of a crypto-crisis in the fall of 2022, I delivered a keynote address at the inaugural Digital Assets @Duke conference, where I called for the Commission to organize roundtables and convene discussions to better understand the type of regulatory interventions that may lead to effective supervision of rapidly developing and evolving decentralized finance markets.[3] I encouraged the Commission to begin a multi-stakeholder dialogue on digital asset markets that would help to prepare the Commission staff to create regulation to carry out a Congressional mandate and, at the same time, offer educational workshops on foundational issues such as corporate governance, resolution planning, and customer protection features of CFTC regulation.[4] These regulatory pillars are hardwired in our supervision and should be part of the regulatory architecture for any novel assets or markets that come under Commission supervision. Same risks, same rules. Moreover, these governance and operational guardrails have historically served to ensure that firms are able to withstand anticipated shocks (for example, by promoting enterprise risk management) and that markets remain resilient—even in times of significant distress.
I am proud to have served as Sponsor of the Market Risk Advisory Committee (MRAC). I am grateful for the hard work of Alicia Crighton (Chair of the MRAC), the members of the MRAC, and the members of the MRAC Subcommittees—the Market Structure, Central Counterparty Risk & Governance, Interest Rate Benchmark Reform, Climate-Related Market Risk, and Future of Finance Subcommittees.
As Sponsor of the MRAC, I led the Commission in taking on, in real-time, emerging cyber defense and cyber resilience concerns. In March of 2023, the MRAC hosted a first-of-its-kind hearing to examine cyber threats and potential solutions in derivatives markets. Over the last three years, the MRAC has submitted three sets of recommendations and a cutting-edge report to the Commission. The recommendations and report address system safeguards, critical third-party service providers and cyber resilience for institutions at the center of our market infrastructure; the efficacy of recovery, resilience, and wind-down policies for intermediaries in our markets; risk management related to the cash-futures basis trade; and a report on the state of the futures commission merchant market.
The central tenants of the Commodity Exchange Act inform the CFTC’s mandate—to prevent fraud and market manipulation, protect investors and customers, and ensure the stability and integrity of our markets. In order to deter escalating or future misconduct, I have strongly supported efforts to ensure that the Commission upholds this mandate, enhances customer protection, and holds bad actors accountable.
Artificial Intelligence in Financial Markets
While derivatives transactions in financial markets date back to ancient Greece, none of the Greek philosophers who lived two thousand years ago had the ability to generate a philosophical tome or literary masterpiece by simply typing a few questions into ChatGPT.[5] Simply stated, today’s financial markets are evolving at an unprecedented and accelerated pace. I arrived at the Commission deeply committed to advancing the Commission’s understanding of AI and AI use cases relevant to our markets. During my tenure at the Commission, I partnered with leadership across the industry, government regulators, public interest advocates, academics, and Commission staff to initiate a dialogue on the increasing adoption of AI by our market participants as well as the incorporation of AI in regulatory oversight and supervision.
Information-Gathering
In January 2024, I rolled up my sleeves during a winter storm and worked in collaboration with talented CFTC senior staff to develop the Commission’s first request for comment on AI in CFTC-regulated markets.[6] Later in the year, I represented the Commission in the development of the U.S. Department of the Treasury’s request for information on AI.[7] I also represented the Commission by serving in an association of federal regulators across government agencies engaged in understanding the implications of integrating AI in government supervision and regulation.
In June of 2023, I joined a group of market regulators reflecting on the integration of AI in supervisory technology (SupTech) at the International Organization of Securities Commissions’ (IOSCO) Annual Meeting in Bangkok, Thailand. Days after IOSCO’s Annual Meeting in June 2023, I launched an annual international roundtable to explore AI and other novel technologies and the impact of these technologies on market structures with the former U.S. Ambassador to Spain and Andorra, Julissa Reynoso Pantaleón.[8] I have served as a keynote speaker at dozens of industry and trade association conferences as well as academic institutions including Yale, Stanford, Duke, New York University, the University of Pennsylvania, Georgetown, the University of Chicago, and Cornell Law Schools, as well as Rice University’s Baker Institute, among other institutions where I have been fortunate to engage in thoughtful conversations with leading experts representing diverse viewpoints.
My engagement with market participants, U.S. market and prudential regulators, and global market regulators around the world has left me with the impression that we are still in a learning phase and are continuing to develop more precise understandings of the power, potential, and limits of developed and developing applications of AI, including generative and agentic AI. I have, however, advocated for a few accessible policy initiatives that the Commission should begin to take steps to introduce.
An Inter-Agency Task Force – Collaboration and Coordination
Over the last three years, I have advocated for AI policy priorities that must be at the center of the CFTC and other regulators’ policy agenda.[9] I have called for coordination among regulators to ensure that regulators are informed and have the depth of expertise to respond effectively to emerging technologies. I have asked the Commission and other financial market regulators to create an Inter-Agency AI Task Force to establish a pathway for open dialogue through deep dive, public and closed-door roundtables among the Commission, market participants, other market and prudential regulators, and public interest advocates.[10] Shortly after the announcement of my proposal, the Commission named its first Chief AI Officer.
CFTC AI Fraud and Market Manipulation Task Force
Our markets are faced with increasingly sophisticated forms of AI driven fraud. Evidence suggests that hackers are repurposing AI-based tools previously used in cyber defense tactics to identify weaknesses in networks and cybersecurity applications. These weaknesses open back doors for cyber-attacks. Generative AI may enable sophisticated actors to execute more convincing phishing campaigns. Deep fakes and similar campaigns may be more difficult to detect, especially for less sophisticated consumers and retail participants.
I have encouraged the Commission to create an internal AI task force within the Division of Enforcement and introduce heightened civil monetary penalties in instances where bad actors use AI to engage in fraud or market manipulation. In conversations with regulators in jurisdictions around the world, I have advocated for regulators to better understand AI as a SupTech resource that may enhance our ability to more precisely target AI fueled cyber and fraud attacks that threaten to upend the integrity and stability of domestic and global financial markets causing severe market disruption.
Human Capital and Financial Resources
The CFTC continues to punch above its weight. The agency, however, must have both financial and human resources to keep pace as industry participants integrate increasingly complex iterations of AI. As our markets become more complex and reflect the incorporation of and reliance on novel technologies, the Commission must have the resources to effectively supervise more sophisticated markets. I believe that the Commission would benefit from increased resources dedicated to enabling several of the Divisions within the Commission to prepare for and meet the challenges of regulating innovative trading, clearing, and settlement technologies.[11]
The Market Risk Advisory Committee
In my role as Sponsor of the MRAC, I have convened stakeholders with diverse perspectives to address critical, complex issues facing our markets. Under my leadership and working in collaboration with industry executives representing exchanges, clearinghouses, futures commission merchants, as well as public interest advocates, academics, and many others, the MRAC examined many of the most pressing risks across our financial markets, including systemic issues that could threaten the stability of derivatives markets.
During my time as Sponsor, the MRAC has focused on increasing concerns presented by cyber threats; the significance of critical third-party service providers such as cloud-based service providers; the introduction of artificial intelligence in market infrastructure and commercial and retail transactions; and novel and nascent issues that arise with the introduction of decentralized financial products such as digital assets or cryptocurrency and other emerging markets.
In March of 2023, the MRAC hosted a first-of-its-kind post-mortem on the implications for markets following the cyberattack on back-office service provider ION. The hearing included presentations by Matthew Cronin of the White House’s Office of the National Cyber Director; Tom Sexton, President and Chief Executive Officer of the National Futures Association; Walt Lukken, President and Chief Executive Officer of the Futures Industry Association; Julie Holzrichter of CME Group; Amanda Olear, Former Director of the Market Participants Division of the CFTC; Greg Ruppert, Executive Vice President of FINRA; Ashwini Panse of Intercontinental Exchange; Suyash Paliwal, Former Director of the CFTC Office of International Affairs (OIA); and Senior Special Counsel Kirsten Robbins of the CFTC OIA, among others.[12]
At the MRAC’s most recent meeting, the Committee voted to submit recommendations on many issues—a report and recommendation on the need to evaluate our regulations governing critical third party service providers (particularly in areas marked by concentration risks due to a limited number of competitive service providers); cyber resilience for derivatives clearing organizations; and best practices for managing market, liquidity, counterparty credit, and other risks related to the cash futures basis trade.[13] In addition to these significant contributions, the MRAC advanced important recovery and resolution proposals and published a cutting-edge report on concentration risk engendered by a decline in the market for futures commission merchant services over the last two decades.[14]
The MRAC’s work on each of these critical questions will help the Commission to address emerging issues and enhance the Commission’s ability to promote the stability and integrity of derivatives markets.
The Importance of Public Service
I began my legal career as a law clerk for the Honorable Judge Joseph A. Greenaway Jr. I am thankful that the Judge was willing to take a chance on me; the Judge hired me as a second-year law student to serve as his law clerk upon my graduation from law school. Having spent the better part of his career as a federal prosecutor and later a federal judge, Judge Greenaway taught me to value public service and the importance of building relationships in the communities in which we serve.
I am grateful that I have had the opportunity to serve the CFTC community. Every well-developed proposed or final rule review, open or closed meeting briefing and engagement, advisory committee meeting agenda, and policy initiative advanced by my office benefited tremendously from the tireless work and commitment of my current and former staff. I would like to extend my sincere thanks to everyone who served my office in any counsel, policy advisor or law student intern role. I am also grateful to the incomparable executive assistants who supported the administrative functions of the office.
About Commissioner Johnson
Immediately prior to joining the Commission, Commissioner Johnson served as a tenured professor with an endowed professorship (Asa Griggs Candler Professor of Law) and Associate Dean for Faculty Research at Emory University School of Law. Commissioner Johnson also held a named professorship and served as Associate Dean for Faculty Research at Tulane University School of Law. Prior to law teaching, Commissioner Johnson served as a lawyer in private practice at Simpson Thacher & Bartlett LLC’s New York and London offices supporting the mergers and acquisitions, private credit and public and private capital markets practices. Upon leaving private practice, Commissioner Johnson joined J.P. Morgan Chase as Vice President and Assistant General Counsel in the Treasury Services Division supporting private funds. Before attending law school, Commissioner Johnson served as an analyst at Goldman Sachs in the Asset Management Division.
Commissioner Johnson is the co-author of two forthcoming books—The Cambridge University Press Handbook on Artificial Intelligence & The Law and Artificial Intelligence & The Law: Cases and Materials. Her recent work examines the implications of emerging innovative technologies including distributed digital ledger technologies that enable the creation of digital assets or cryptocurrency as well as networked, centralized and decentralized transaction-enabling infrastructure. Her early scholarship focuses on financial market disruptions that may create systemic risk concerns, with particular emphasis on the origination of derivatives and other complex financial products as well as secondary market trading, clearing, and settlement. She has testified before Congress on the benefits and risks of integrating emerging technologies such as blockchain or distributed digital ledger technologies and AI in financial markets.[15]
[3] Keynote Address of Commissioner Kristin Johnson at Digital Assets @ Duke Conference, Duke’s Pratt School of Engineering and Duke Financial Economics Center, Mitigating Crypto-Crises: Applying Lessons Learned in Governance, Risk Management, and Compliance (January 26, 2023), https://www.cftc.gov/PressRoom/SpeechesTestimony/opajohnson2.
[4] See Kristin N. Johnson, Commissioner, CFTC, Federal Reserve of Chicago Financial Markets Group Fall Conference, Investing in Investor Protection (Nov. 16, 2022), available on file with the Federal Reserve Bank of Chicago; see also Nahiomy Alvarez, Nomaan Chandiwalla, Alessandro Cocco, 2022 Financial Markets Group Fall Conference–Recap, https://www.chicagofed.org/publications/blogs/ chicago-fed-insights/2023/2022-fmg-fall-conference-recap (Feb. 6, 2023).
[5] Kristin N. Johnson, Regulating Cryptocurrency Secondary Market Trading Platforms, 1/8/2020 U. Chi. L. Rev. Online 1 (2020).
[7] See U.S. Department of the Treasury, Artificial Intelligence in Financial Services (Dec. 2024), https://home.treasury.gov/system/files/136/Artificial-Intelligence-in-Financial-Services.pdf (Treasury December Report).
[15] In April of 2021, Commissioner Johnson testified before the United States House of Representatives Subcommittee on Consumer Protection and Financial Institutions. In July of 2019, she testified before the House Financial Services Committee Artificial Intelligence Task Force on the implications of integrating artificial intelligence in financial technology (fintech) platforms.
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