CME's Terry Duffy on the Disconcerting State of Finance Regulation | Odd Lots

Thank you. I really appreciate it.

Okay. I'm a big believer in that. I think that you need to make sure you have a good smooth transition. I've been at CME for 46 years, got my first job for $56 a week. I've been the chairman since 2002 when I took CME public. And I've been doing this an awful long time and now being CEO for all these years. So I think it's really important to have a good smooth transition. I'll stay on as executive chairman to help Lynne FitzGerald through the initial phase of it, and if needed, I'll be there. But if not, show's in the firm.

Yeah, I'm still CEO, so I got to be a public company.

It's amazing. I was just talking to my friend Don Wilson, who will be out here shortly, and talking about the early days of when we both joined. I was 21, he was 22, but I'm ten years older. And so anyway, when we look at the regulation and what it was, I mean, the CFTC was basically brand new. It was 1973, '72 area came into play, and it was basically a principles-based oversight agency for agricultural products. And then all these new innovations come along the way, you know, from financial futures that echoed stock equity indexes and other cryptocurrency and everything else that's going on. So it's changed dramatically throughout the years. And then of course, we've had some situations with bad behavior in 2008 and the financial crisis due to the leverage issue and housing market. And you go through a whole iteration of change again through Dodd-Frank. And now we are still, even 16 years later, still trying to figure out parts of Dodd-Frank. So it's pretty amazing how far it's come.

Yeah, yeah. It does feel a bit of a ready, fire strategy going on right now where anything can go. And so it's very disconcerting. I'll give you a couple of statistics, which really troubled me. Since the second Trump administration has come into place, there's been 2,500 self-certifications that have been submitted into the Commodity Futures Trading Commission. Not one of them has been denied. And how can it be that not one of them has been denied? So when you look at some of these prediction markets, I've made fun of them. And people say, will you please stop bringing this up? I bring up they approved a contract on predictions on Nathan's Hot Dogs. How many hot dogs did Joey Chestnut eat? I have to ask, what's the economic impact of that contract being out there? And how is it not in violation of Core Principle Three, which is readily susceptible to manipulation? George Santos, is he going to show up at the State of the Union address when President Trump was there, the former disgraced congressman from New York? Well, he bet against himself and didn't show.

I mean, the teleprompter for President Trump, you know, I mean, think about all these things that are susceptible to manipulation. So to answer your question, is there any regulation? Yes, there's regulation. And it's extremely important. The way we grow good, strong, confident markets is to have a good balance of regulation, not to have no regulation. No regulation is on borrowed time. There's no question about it. Always has been, always will be. So you know what's going on right now at the agency. They are circumventing basically acts of Congress. And they are making rules and regs that are associated, whether it's at the CFTC or SEC. Well, I remind market participants those are rules and regs of the agency that can be easily swiped away by a pen when the next administration comes in. We all remember when President Trump came into office last time and he had a big show about how his executive orders were getting rid of everything that Joe Biden did. Well, the next president can do the same exact thing. So these are not sustainable, good, smart regulation. Well, you need to make sure it can withstand any administration. So I think to answer your question, is there any regulation? Yes. Is some of it ridiculous? Yes. But it doesn't mean there's no regulation, okay.

Well, I think if I heard your question right, inside information is good, is what you said. I have a hard time believing that for the average participant especially, that doesn't have that information, they would agree with you. And to think that certain people have this is what we've all been fighting for through technology is they have the ability for all of us to have the information at the same time, so we can participate. I don't have as much money as my dear friend Don Wilson, who's coming out here, but I might have the same information he gives. I just can't deploy it in the same way. But I should have a level playing field on the information. So to say that inside information could be a good thing and anything is available to me, as a guy who's traded markets and run markets for the last 25 years, I just don't see any place in it. No credibility. If you're going to grow anything by saying you get the no, you get the no. But I don't get the no. And it's not too dissimilar than the president of the United States with Truth Social today charging $200,000 to give information faster. I mean, you're the president of the United States. You're supposed to give information to all of us at the same time, not have a feed to get your information quicker so others can act on it. So I have a real problem with some of this stuff.

I tell you, I don't think I gave them an opinion.

Well, I mean, you lose a lot of things, but you talk about prediction markets in general.

I'm not opposing some of these markets. I'm opposing the ones that violate the Commodity Exchange Act or core principle, which is Core Principle Three, which is susceptible or at least susceptible to vulnerability. You cannot list those contracts. And I just gave you a few examples of that. It doesn't mean that I'm against all prediction markets. If you look at sports, I believe sports predictions is gambling. I don't think there's any way around it. Everyone agrees with that, well, they didn't rule. But from my standpoint, if LeBron James gets 20 or 30 rebounds again, what's the economic impact to the three of us on this stage, or the folks sitting here and your audience tonight? They have none unless they're on the yes or no side of that. Right. That's it. And most contracts need to have a natural buyer, a natural seller, commercial and a producer of that product in order to facilitate a contract. And that's how traditionally most contracts get approved, otherwise they should not be approved. So I think that the credibility of the marketplace is really important. Now we started something with a company called Future Sports, Future Sports out of Australia. It's a great firm and they're doing amazing things. And someone says, well, you're being a little, you know, two-sided. If you're saying that you don't like, you think these are not regulated and they should be regulated by the federal government, not the states. What about Future Sports? Well, Future Sports is an index. It's very similar to the S&P 500. Every team starts out at 7500 and you go up and down depending on performance. But at the same time, it helps people who own these teams monetize the value of their teams without selling them. So great example, Chicago White Sox. We were fortunate enough to be a sponsor of the Chicago White Sox this year, and they had an amazing year that no one thought they were going to have. But my dear friend Jerry Reinsdorf probably could have charged me a lot more if I would have had a vehicle to lay off some of that risk to put a patch on a seat, but that market wasn't there. So there's ways to do that, and you can take that through the economic system of sports. And now we just did a deal with the NBA. We've done a deal with MLB, and these guys have done an amazing job. So there's a value there to the ecosystem. It's just not a value to you. And that to me is the big difference.

He's wrong. No.