David Miller ’98 of CFTC announces enforcement priorities in NYU Law speech

Speaking at NYU Law on March 31, David Miller ’98, director of enforcement at the Commodity Futures Trading Commission (CFTC), unveiled a new roadmap for the agency’s enforcement priorities. The speech constituted Miller’s first public remarks since he joined the CFTC earlier in March from Greenberg Traurig, where he was a litigation partner. The event was hosted by the Program on Corporate Compliance and Enforcement.

Miller described the areas where the CFTC will concentrate its enforcement efforts, and emphasized that the new and fast-growing prediction markets are not exempt from scrutiny for insider trading violations. He also announced that the agency had revised its policies for declination of prosecution in cases where a potential defendant cooperates with the government’s investigation. 

“My approach to enforcement will draw heavily upon my experiences as a prosecutor and as a defense lawyer, focusing on the most serious cases and moving decisively, but also acting fairly, justly, and transparently,” said Miller. Before entering private practice, he worked as a federal prosecutor in multiple roles, including on the Securities and Commodities Fraud Task Force in the US Attorney’s Office for the Southern District of New York.

Miller began his remarks by underscoring a policy shift. “Let me start off by saying this as clear as can be. The era of regulation by enforcement is over,” he said. Under the Trump administration, financial regulators such as the Securities and Exchange Commission have signaled that they will eschew enforcement actions in areas where clear guidance has not been issued. 

“We will focus on the Division’s core purpose of policing fraud, abuse, and manipulation, rather than setting policy,” Miller said. CFTC enforcement will prioritize five areas, he explained: insider trading; market manipulation; market abuse, such as disruptive trading during a closing period; retail fraud, including Ponzi schemes; and willful failures to follow anti–money laundering and know-your-customer rules. He singled out market manipulation in energy markets for particular attention.

“Energy prices are, of course, influenced by geopolitical events, including recent ones,” he said, in an apparent reference to US hostilities with Iran and the concurrent rise in oil prices. “The futures markets are critical for managing price volatility and risk. But when volatility and high prices occur, they are tempting to would-be manipulators. Be advised: we continue to scrutinize these markets and remain focused here.”

In the second part of his speech, Miller focused on insider trading in the prediction markets, which he called “essentially an exchange in which participants buy or sell contracts based on the outcome of future events.” He criticized what he called a widespread and mistaken belief that insider trading is permissible in the prediction markets. 

“Some have suggested that insider trading is inevitable or beneficial because it gives people with confidential information a financial incentive to trade on, thus releasing the information to the public. These comments all suggest that insider trading is an important and acceptable part of the prediction markets ecosystem,” he said. “Not so.” 

Miller went on to lay out a detailed legal analysis of the issue. The CFTC considers that bets in prediction markets meet the statutory definition of swaps—agreements providing for payment tied to the occurrence, nonoccurrence, or extent of an event with economic consequences. As swaps, they are subject to prohibitions against insider trading laid out in the Commodity Exchange Act and the Dodd-Frank Act, he said.

Among the areas of concern, Miller said, are sport-related event contracts. “Injury contracts, for example, present both manipulation and insider trading risk,” he said. “On the manipulation side, a player could injure another player to collect on a contract. On the insider trading side, those with advanced nonpublic knowledge of an injury—say, a trainer—could use that information to trade.” He cited a recent memorandum of understanding between the CFTC and Major League Baseball to exchange information and guard against fraud in baseball-related events contracts. 

Miller closed his speech with a broad outline of new CFTC policies on how the agency will treat parties under investigation who cooperate with the government. If an eligible party self-reports wrongdoing, cooperates fully with the investigation, and remediates the harms caused, Miller said, “then, absent aggravating circumstances, we will give that party a clear path for declination [of prosecution].”

“We will simplify how we evaluate cooperation,” Miller noted. “I have always believed that cooperation is binary. It’s like jumping into a lake. You’re either in or you’re out, one hundred percent. You can choose to cooperate, in which case we expect full cooperation…. Or you can choose not to cooperate fully, in which case we’ll always treat parties fairly, but you’ll lose the path for declination.”