About Gary Gensler
Gary Gensler, former chair of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), has been active in media appearances discussing securities regulation, prediction markets, and artificial intelligence. Regarding the SpaceX IPO, Gensler said the offering represents a shift in corporate governance, noting that insiders will not have a traditional lock-up period and that shareholders cannot sue the company but must go to arbitration. He stated that these risks "have to be understood by shareholders." On the topic of quarterly earnings reports, Gensler opposed a proposal to move to semi-annual reporting, calling it "a solution in search of a problem" and arguing that transparency is important for capital markets.
Gensler has been a vocal critic of expanding the CFTC's authority over prediction markets and sports betting. He argued that Congress did not intend for the CFTC to become a national regulator of sports betting when it passed the Dodd-Frank Act, and said states should regulate such activities. He also warned about the risks of AI, stating that "we will have a financial stability event" if banks and trading shops rely on the same AI models, and that threat actors will use AI to probe for vulnerabilities. Regarding insider trading in prediction markets, Gensler said Congress should prohibit government officials and their families from trading on these platforms, calling it "too hard to police this and to enforce it rigorously."
Source: AI-verified profile updated from Gary Gensler's recent appearances.
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✨ AI-enhanced transcript with speaker attribution
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Interviewer0:00
Chair Gensler, I'd love you to listen to a response as well though from the Virtue Financial CEO specifically about you and what he had to say in terms of what he claims is you conflating some issues when it comes to payment for order flow and then get your response.
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Gary Gensler0:14
He's conflating the issue of payment for order flow and the inherent conflict which has been addressed and dealt with for the last 30 years by the SEC, with order routing and price improvement. Two separate issues. And the data around price improvement is so overwhelmingly compelling: 11 billion dollars of price improvement in 2020, 11 billion dollars, and zero commission trading in this country. Game, set, match.
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Interviewer0:39
Your response?
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Gary Gensler0:41
Well, let me just address it. I don't think that the disclosures that are put out really address the question about whether people are getting best execution. Best execution means best execution. So we have something in America where nearly half of the trading is going to dark pools and to the wholesalers, one of whom you were just interviewing. Wholesalers that dominate and concentrate the market. And even that which is on the so-called lit markets, the New York Stock Exchange and Nasdaq, many of the trades there are not being fully displayed. So this concept of price improvement is against a measuring stick which is not fully reflective of the market. Our consolidated tape, our national best bid and best offer, so to speak, does not reflect the half in the dark markets. It doesn't even reflect a lot that's on the exchanges. So if you or I make a trade, a market order retail trade, where does it go? 90-plus percent chance it goes to a handful of wholesalers, one of whom you were interviewing. I would say that's a conflict. And the thing that we're trying to do is update our markets for the 2020s. They were last seriously updated in 2005. A lot has changed in those 16 years.
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Interviewer2:12
You know, Mr. Chairman, I want to follow up on that. This notion of payment for order flow, and I understand what the Virtue fellow said, but isn't it true that if brokerages are optimizing their digital engagement practices for their own revenue, that may not be exactly on the same page as giving investors the best returns? So therefore investors should know ahead of time that they may not be getting the best returns by so-called paying no commissions?
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Gary Gensler2:39
Jim, I thank you for that. You're absolutely right. So today's data analytics aren't what you and I learned in college. They're very sophisticated, and they can optimize for the trading platform or the robo advisor to maximize their revenues and their data collection. That may well be in conflict with your investor returns. When they're trying to use a behavioral prompt to get you to trade more or to move into one of their investment products. Secondly, you mentioned zero commission. Zero commission does not mean it's free to the retail public. You may not be getting best execution, and so that's what our economists, that's what we're looking at very closely to see can we do better. And I think that we can do better than the regime that was laid out 16 years ago.
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Interviewer3:31
You know, when we talk about regulation exposure to a number of new platforms and technology, not just in financial services, one I think we keep coming back to is the popularity of the platforms creating friction for regulators. Is it any more difficult to regulate something that's popular, maybe because the client base does believe it is zero commission?
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Gary Gensler3:53
Well, you raise a good point. Technology has come along and changed the nature of finance. I mean, the internet came along, and that changed the nature of finance as well. So these are the challenges we have. It makes it an exciting job. But at the core, what we're trying to do is get competition in the market. I mean, it's a basic thing in America. I'm deeply a markets person and believe in transparent trading and competition order by order competing. And right now, we have large wholesalers buying a bunch of that order flow, so that the retail public, most of your trades are going to a small handful of wholesalers. And in fact, they've publicly announced there's a high concentration amongst two or three of them, and that's not the lit markets of New York Stock Exchange or Nasdaq as we know them.
