Bloomberg audio studios podcasts radio news. A federal government agency is reportedly investigating possible insider trading involving big swings in oil markets ahead of a major policy announcement by President Trump.
Commodity Futures Trading Commission is examining at least two instances where trading volume surged right before those announcements were made. Joining us now is Gary Gensler, the former chairman of the CFTC. He also served as the chairman of the SEC and has a new podcast called Power and Consequences. It's you and the Nobel Laureate Simon Johnson dealing with a lot of these issues. Prediction markets is what we want to talk the most about. But let me ask you quickly about this story. You held the agency after the global financial crisis. There were a lot of raised eyebrows after word of this trade came out. What is your read on what's happening here and maybe take us behind the scenes of what the CFTC might be doing as it looks into this.
One, the only way that the American public can have confidence in markets is they think that insiders can't get ahead of them with material information. I mean, that's just not fair, right? But two, the only way we can have confidence in our government is that we don't think that somebody in government or their friends or family are trading ahead of us, right? So those two things are really important. And we knew that 16 years ago. After the financial crisis, we were putting reforms in place and I was honored to head this thing called the CFTC. And we were going to Congress. And I have to tell you a little story about Eddie Murphy.
The comedian, yes. An actor. And he had done this movie Trading Places.
Legendary movie in my household. I never understood the end of it until like a year ago, but yes, this is an amazing movie.
And it's an amazing movie where Eddie Murphy is trading these things called futures. It's a contract where it's the future.
There you go. There you go. But do you remember, Christina, what he was trading it on? He was trading it on a report from the Department of Agriculture about the orange crop. He basically had inside information.
So I get to the Commodity Futures Trading Commission. I asked the staff. I said, 'Well, that's illegal, right?' And they go, 'Well, boss, there was a lot of mumble mumble.' And wonderful people. So we went to Congress in the midst of all that. We said, 'We've got to get something.' And I used to say it was the Eddie Murphy provision.
It's got to be illegal. Well, guess what? We were successful. Al Franken, who was in that movie and was a senator, had great yuks on that latest hearing. Great yuks on a couch in his office. But here's where it is today. It is illegal for a government actor, somebody who works in the government, to pass on information to somebody and to have that person knowingly or with reckless disregard of the knowledge trade on that information. Also, it's illegal for that government actor to do it.
Yes. So it's both the government actor or somebody passing on. But how do you... I'm sorry, go ahead. So it's illegal. Yeah. But how do you prosecute it? Because it can't be easy because it's not like these trades all have the person's name on them. They go through intermediaries. They go through trading desks. Talk to us about how the investigation works. You have to figure out who did it, when they did it, what information they have, and if it was public information or not.
It's hard. It's hard. And I was honored to run federal law enforcement agencies twice. One in the commodity space, one in the security space. And so the staff is doing this, not the political appointees. But the staff is doing it with a lot of technology, now using artificial intelligence as well, tracking and looking for patterns. Just like you do at Bloomberg. Looking for patterns. Is there a spike in trading three minutes before something happens? Like we saw late in March, I think it was March 23rd. Like you've all reported, we saw again on April 7th. Like various members of the House and Senate on both sides of the aisle have written Senator Warren, but others also Senator Whitehouse and others have written. And so I would think yes, the government's going to investigate these things. But to your point, Christina, it's hard because it's about pattern recognition and then getting behind that and saying, 'Well, who actually traded?' And even if you identified David, I'm not saying you did this. But if David, somebody in your production booth, your control room in the one second delay that we have here, traded on whatever information even in that one second, they might be trading on material non-public information. I'm not saying they are.
No, of course not. Right. We'll follow up after.
If they don't show up for their shift, we'll know something's happened. But so far our team is all still here, so.
Right. Right. But then what happens if all those government actors show up for their shifts? They're in a situation room. They're or maybe they're handling President Trump's tweet.
Mhm. Yeah. Or they call it X now.
Right. The same thing. Or Truth Social.
Yes. Right? So that's important. Look, I think also Congress is looking at whether to ban certain contracts, prediction markets. They think about it.
Well, let me use that as a segue. We had Alyssa Slotkin on the show talking about a ban that she's suggesting be put in place for government officials. They shouldn't be able to make bets on political... Congressional staff or congressional staff. And in that interview it was kind of clear that there was some ambiguity surrounding who's regulating these spaces. So as we talk about prediction markets and you on a recent podcast episode point out, people have been betting on things for centuries. Someone betting on the Pope who's not going to be back in the 15th century, whatever. Is it well regulated? When we look at Kalshi, which is domiciled here in the United States, Polymarket is not. It's overseas and subject to less regulation. Is there an adequate regulatory apparatus surrounding all of this right now?
