CFTC Division of Enforcement Resets Its Priorities - Energy Market Manipulation Identified as a Key Risk

Theme 1 - CFTC’s New Enforcement Philosophy

Under Chairman Selig's leadership, the DOE will concentrate on what Mr. Miller describes as its core purpose of policing fraud, abuse, and manipulation rather than using enforcement cases to set substantive policy on novel questions.

This, in the view of many, is the opposite of how the CFTC under the Biden-era leadership approached enforcement which attracted claims from industry that the CFTC was attempting to regulate through litigation rather than notice-and-comment rulemaking.

Mr. Miller notes that the CFTC will focus on the five named priority areas (as articulated in the previous section) and will not dedicate resources to technical violations where there is no evidence of intent or serious harm.

He frames his approach around three principles drawn from his prosecutorial career:

1. Government power should address serious violations;
2. Government investigations should move quickly; and
3. Government must be fair and transparent.

Mr. Miller closes the speech by confirming that the CFTC is actively hiring additional staff across all five priority areas. Reports of attrition within the CFTC during 2025 led some market participants to assume that enforcement activity would remain at a reduced level. His remarks signal that this assumption is likely not accurate. The CFTC intends to rebuild its investigative capacity in parallel with the new priority framework.

We are committed to addressing these priority areas and we will be hiring additional staff in the Division of Enforcement to help address them.

Routine compliance failures such as late trade reports or process gaps are less likely to attract enforcement attention than was the case under the previous CFTC leadership, provided they do not involve wilful conduct or a pattern of recurrence.

What has changed is the CFTC’s stated appetite for pursuing purely technical breaches absent clear evidence of harm or intent.

For energy and commodity trading firms, internal escalation frameworks should be re-reviewed to ensure staff can identify and self-report a genuine fraud or manipulation issue before the self-reporting window closes under the new cooperation policy (see below Theme 6 - The New Cooperation and Declination Framework).

In addition, board-level risk committees should be briefed on the five named priorities as the areas of heightened enforcement focus inclusive of market manipulation in energy markets.

Finally, it is worth mentioning that the CFTC is increasing enforcement staff levels (not reducing them as widely perceived) which is the clearest signal to date that enforcement at the CFTC is not going away.

Theme 2 - Energy Market Manipulation and Market Abuse

Market manipulation is the second of five named priority areas, but Mr. Miller’s remarks regarding energy market manipulation clearly distinguishes it from manipulation in other commodity sectors. He makes three specific arguments for why energy market manipulation warrants a sharper enforcement response.

1. Inelastic demand. Energy markets exhibit 'inelastic demand and limited substitutability' whereby consumers cannot simply switch away from energy products when prices rise. Artificially elevated prices fall directly on end-users, and manipulators can extract rents that would not be available in markets with more elastic demand.
2. Economy wide price transmission. Miller observes that energy costs ripple through the economy, affecting many goods in both production and shipping. Manipulation that raises the price of natural gas or crude oil does not confine its effects to energy consumers alone but rather propagates through supply chains in ways that are difficult to track and reverse.
3. Storage and supply-side constraints. Energy is harder to store than many other commodities. He uses jet fuel as an example of a product that cannot be stockpiled in the same way that copper or grain can be. The inability to buffer supply creates windows of vulnerability that manipulators can exploit and which limits the market's ability to self-correct when prices are distorted.

Mr. Miller also notes that recent geopolitical volatility makes energy markets simultaneously more important to hedge and more attractive to would-be manipulators. Futures markets are presented as the appropriate mechanism for managing price volatility, but he notes that the CFTC will scrutinise these markets closely precisely because elevated volatility creates temptation.

Market abuse as a related form of manipulation. The CFTC’s third priority area is market abuse and disruptive trading. Miller describes market abuse as 'a form of manipulation' and names three specific types of conduct that the CFTC will pursue:

• Spoofing;
• Disruptive trading during a closing period; and
• Wash trading.

Each is prohibited under distinct statutory provisions:

• CEA § 4c(a)(5)(C) prohibits spoofing;
• CEA § 4c(a)(5)(B) prohibits disruptive trading during the closing period; and
• CEA § 4c(a)(2) prohibits wash trading.

For energy and commodity markets specifically, where benchmark prices set during settlement windows carry significant downstream consequences e.g. physical delivery pricing, hedging valuations, contract settlements, the closing-period manipulation prohibition is particularly relevant. Disruptive activity in the final moments of a trading session in a thinly traded energy product can move settlement prices that could attract CFTC scrutiny as has happened in past CFTC enforcement decisions.

Energy trading firms, particularly those active in natural gas, power, crude oil, and refined products, should treat Mr. Miller’s remarks as a clear signal that surveillance programmes covering both manipulation and market abuse will continue to receive CFTC scrutiny, not less under the new administration.

Given recent geo-political events and ongoing market turmoil, volatile markets can inadvertantly result in trading patterns that superficially resemble manipulation such as large position concentrations, rapid accumulation and unwinding without any manipulative intent. Firms operating in volatile conditions should ensure their position management and escalation processes are documented in a way that would withstand CFTC scrutiny.

Specific to spoofing, algorithmic trading programmes that insert and rapidly cancel orders, or that trade in ways designed to create artificial price activity at settlement, carry spoofing exposure regardless of whether a manipulation charge could be sustained. Compliance and trading desk heads should work together to ensure that automated order management parameters are reviewed against the spoofing prohibition.

Theme 3 - Insider Trading in Commodity (and Prediction) Markets

Mr. Miller addresses a widely held but legally mistaken belief that insider trading rules do not apply to prediction markets. His argument rests not on novel legal theory but on a statutory framework that has governed commodity markets for over a decade and has produced real enforcement action against energy traders. He further references multiple historic insider trading cases in commodity markets as a reminder that these types of cases are still on the CFTC’s radar.

While prediction markets are most likely not relevant to many energy and commodity trading firms, there could be an argument that policies should now be updated for personal account dealing so that staff cannot trade on prediction markets based on MNPI.

As a reminder, the statutory basis for insider trading trading is found in Section 6(c)(1) of the CEA and CFTC Rule 180.1, both enacted under Dodd-Frank. These provisions were deliberately modelled on Section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5. The Dodd-Frank drafters intended to import the securities insider trading case law into commodity and derivatives markets, and the CFTC has consistently interpreted its rules accordingly.

Mr. Miller reminds the audience about two theories of insider trading which exist in US law and the one that applies to commodity markets:

To delve deeper, insider trading is defined by two judicially created theories: the classical theory and the misappropriation theory. The classical theory prohibits corporate insiders from breaching a duty they owe to the company’s shareholders by trading on MNPI opposite those shareholders. This is unlikely to apply under the CEA. But the misappropriation theory does apply. Under the misappropriation theory, liability attaches when an individual: (1) possesses material non-public information; (2) misappropriates that information by trading on or tipping in breach of a duty of trust and confidence owed to the source of the information; and (3) does so with scienter. In the CEA context, such trading must be in connection with a contract for sale or purchase of a commodity, future, or swap in interstate commerce.

Mr. Miller cites three prior enforcement cases to show that insider trading prosecution in commodity markets is established practice:

• The Clark matter involved a futures trader at a Texas energy company who fed his employer's order-book data to an outside trader who traded against the firm; both the CFTC and the DOJ brought charges (click here).;
• The Ruggles matter involved the head of a major airline's fuel-hedging programme who simultaneously ran the same trades through personal accounts in his wife's name, netting USD $3.5 million (click here).; and
• Motazedi, the first CFTC insider trading case in December 2015, involved a gasoline trader who front-ran his employer's planned trades using the order book he managed (click here).

Each case produced substantial monetary penalties, disgorgement, and permanent trading bans.

While prediction markets are unlikely to have a major direct impact on most energy and commodity firms trading strategies, employees who participate in prediction markets using work-related knowledge e.g. knowledge of a counterparty's trading positions, a corporate transaction, or a regulatory decision, may be in breach of confidentiality obligations owed to their employer, creating CFTC insider trading exposure.

The insider trading legal framework also applies with equal force to traditional energy futures and swaps markets, as the Clark, Ruggles, and Motazedi cases evidence. Mr. Miller made clear that there is a limiting principle that applies in that firms and individuals who trade on information they rightfully own carry no insider trading risk. The risk arises where information originates with a third party and the trader owes a legal or contractual duty of confidence to that source.

Firms may choose to review their personal account dealing policies and confirm that they address prediction market trading. Specifically, standard securities-style policies that restrict trading in listed shares may need to extend to event contracts. Compliance training programmes should also be updated to include prediction markets as a covered market.

Theme 4 - Exchange Obligations as the First Line of Defence

In his speech, Mr. Miller returns repeatedly to the role of designated contract markets (DCMs) as enforcement partners. Exchanges carry statutory obligations under the CEA's core principles that include listing only contracts not readily susceptible to manipulation (CEA § 5(d)(3)), preventing manipulation and price distortion (CEA § 5(d)(4)), protecting markets from abusive practices (CEA § 5(d)(12)), and maintaining appropriate surveillance and compliance procedures.

In the energy market manipulation context, Mr. Miller states that exchanges are 'a critical line of defense' and signals that the CFTC will scrutinise whether they are meeting their obligations.

The exchanges are a critical line of defense. As we emphasized in our recent staff advisories and our notice of proposed rulemaking on prediction markets, exchanges have important obligations under our core principles relevant to insider trading and market manipulation. These include obligations to have appropriate surveillance, compliance practices and procedures, promote fair and equitable trading, protect markets from abusive practices, and, importantly, to only list contracts that are not susceptible to manipulation. The exchanges doing their job are an essential part of the fight against market manipulation and insider trading. And we expect the exchanges to do their part.

Theme 5 - The New Cooperation and Declination Framework

The CFTC’s February 2025 cooperation policy (click here for RegTrail analysis) will be rescinded and replaced by a new Staff Advisory. Mr. Miller provided a preview comprising three structural changes.

1. The declination path. A party that satisfies three conditions will receive a clear path to a declination, issued on completion of cooperation: (i) self-reporting in accordance with the new standard; (ii) full cooperation as defined; and (iii) full remediation including ongoing reporting of violative conduct and disgorgement of ill-gotten gains. The declination is available 'absent aggravating circumstances,' which include pervasive intentional or reckless conduct by ownership or senior management, and recidivism involving intentional or reckless conduct.
2. The self-reporting standard. A party qualifies if it self-reports 'in a prompt, timely, and good-faith fashion even where the party needs more time to investigate regardless of whether the CFTC already knew about the issue confidentially.' The window closes where the information is already public, or where the party knows or suspects that a whistleblower, another government agency's investigation, a self-regulatory organisation (SRO) investigation, or a press report is imminent. Disclosures already required in mandatory annual chief compliance officer reports - which registered entities including FCMs, swap dealers, major swap participants, SEFs, and SDRs must submit to the CFTC under their respective registration obligations, covering material compliance matters and resource adequacy - still count as self-reports for cooperation purposes under the new policy.
3. Binary cooperation. Mr. Miller makes it very clear that cooperation is not a spectrum. Full cooperation requires: disclosing all relevant non-privileged information; sharing internal investigation findings without breaching privilege or work-product protections; making personnel available for interviews; preserving all records including ephemeral messages; undertaking good-faith efforts to secure documents located overseas; and continuing to report ongoing violative conduct. Partial or selective cooperation forfeits the declination path.
4. Remediation. Full remediation requires analysing the conduct, identifying root causes, remediating those root causes, implementing compliance programme changes, and disciplining relevant employees including those with supervisory authority. Restitution to injured parties and disgorgement of ill-gotten gains are prerequisites for a declination.

Mr. Miller concludes by noting that the speech does not in itself create any legal rights, and that the final text of the Staff Advisory and an updated Enforcement Manual will take precedence over the previewed terms.

While not formally issued as new policy, the speech indicates a new framework which materially changes the risk-benefit calculus for voluntary disclosure decisions. The previous uncertainty about whether self-reporting would lead to a declination or simply a smaller penalty was addressed by Mr. Miller who committed to a declination outcome (no enforcement action) for parties that meet all three conditions.

The binary cooperation requirement has a direct implication for document preservation. Firms cannot rely on standard document retention cycles once they have made a decision to cooperate. Communications governance policies, particularly those governing messaging platforms that do not retain records by default, should be reviewed as a matter of standing preparedness.

In preparing for the formal update, firms may wish to:

• Review voluntary disclosure frameworks to confirm they include a clear escalation path from identification of a potential violation to a disclosure decision, with clear guardrails on timing;
• Audit communications governance policies, particularly for ephemeral messaging, to ensure they can support a "preserve all records" commitment at short notice;
• Brief legal and compliance leadership on the aggravating circumstances that may preclude declination eligibility; and
• Review internal investigation protocols to confirm they address supervisory accountability and can produce the root-cause analysis and remediation plan the new policy requires.
  

Theme 6 - Wilful AML/KYC Violations

The fifth and final named priority covers wilful failures to comply with anti-money laundering (AML) and know-your-customer (KYC) laws and rules. Mr. Miller states that the CFTC is not targeting firms that make technical errors or fall short of administrative requirements but rather those who 'willfully decide to break these essential laws.'

He sets out the rationale in terms that extend beyond market integrity in the narrower sense:

• AML and KYC rules are tools for combatting terrorism, narcotrafficking, fraud, and other serious illegal activity; and
• A firm that wilfully undermines those controls is not simply non-compliant — it is allowing criminals, narcotraffickers, and those financing terrorism to access regulated markets through its business.

Mr. Miller goes on to state that criminal referrals will be made as appropriate where wilful AML and KYC violations are identified. The speech does not define the specific products or registrant categories the CFTC intends to focus on within this priority, nor does it cite recent AML enforcement actions.

In the AML context, this covers both deliberate decisions to bypass onboarding controls, for example, accepting business from customers whose risk profile would not pass a genuine KYC review, and reckless disregard of obvious red flags that a compliant programme would have acted on. Mr. Miller’s statement on the exclusion of 'technical violations' signals that the CFTC will not devote resources to AML programme deficiencies that are administrative in character and do not involve the knowing circumvention of the rules.

These are crucial rules—key tools in fighting crime and protecting our markets. We are not prioritizing technical violations, but rather those who wilfully decide to break these essential laws. AML and KYC laws are essential in combatting terrorism, narcotrafficking, fraud, and other serious illegal activity. And we will not tolerate any entity we regulate wilfully violating those laws. As you might expect, we will also initiate criminal referrals here as appropriate.

AML and KYC obligations arise across energy and commodity trading firms through multiple routes either through (i) registration as a swap dealer, (ii) clearing relationships with FCMs, or (iii) bilateral OTC trading with counterparties in higher-risk jurisdictions. The relevant question for any firm is not whether it holds a particular registration, but whether it has a regulated relationship that creates programme exposure. The CFTC's focus on wilful conduct means the quality and documentation of that programme matters.

The criminal referral dimension is the most significant aspect for senior management and boards. An AML prosecution, which is distinct from a civil penalty, carries consequences for individual officers and directors that civil enforcement does not.

Where a firm's AML programme has known deficiencies, the risk assessment should include the possibility that the CFTC characterises those deficiencies as wilful rather than technical. That characterisation will depend heavily on the documented state of management awareness e.g. whether the deficiency was identified, escalated, and acted upon, or whether it was identified and left unaddressed.

The interaction between this priority and the new cooperation policy is also worth considering. An AML or KYC failure that meets the self-reporting and cooperation conditions could qualify for the declination framework. Where a firm becomes aware of a wilful AML or KYC breach, the self-reporting window under the new cooperation policy applies with the same time sensitivity as in any other enforcement context.

Additional compliance operational considerations firms may wish to review include:

• KYC onboarding files for counterparties in higher-risk categories should be reviewed to confirm they are substantively complete and that the due diligence basis for accepting the relationship is clearly recorded; and
• AML training programmes should be updated to reflect the CFTC’s stated intent to make criminal referrals for wilful violations, ensuring that traders and operations staff understand the personal consequences of knowingly bypassing customer screening or transaction monitoring controls.