CFTC commissioner Kristin Johnson steps down, citing digital asset risks

CFTC’s Kristin Johnson steps down, highlighting regulatory gaps across prediction markets and digital assets.

Kristin Johnson, the only Democratic commissioner at the CFTC, left the agency on September 3, warning about risks in prediction and crypto markets. In her farewell speech at the Brookings Institution, she urged regulators to “measure twice, cut once” and focus on consumer protection and market stability.

Before leaving the CFTC, Johnson highlighted a rise in activity in prediction markets, which allow people to place bets on events ranging from elections to sports. She stressed that these markets are still mostly unregulated, offer little protection for retail investors, and operate with limited transparency. Johnson warned that without proper oversight, participants could face significant risks.

I am disappointed that during my time at the Commission we were not able to successfully advance a final rule that addressed the introduction of political event contracts. Activity in markets in most recent months underscores my concerns and the concerns of others about prediction markets

Johnson said.

The former CFTC commissioner warned about digital asset risks, comparing the crypto failures of 2022, including Terra/LUNA, Three Arrows Capital, Celsius, and FTX, to the 2008 financial crisis. She said many crypto firms lack proper governance and compliance, including anti-money laundering checks, know-your-customer rules, and conflict-of-interest policies. Johnson noted that FTX, founded by a nearly 30-year-old CEO with crypto celebrity status, was based outside the U.S. and had little oversight from an independent board. She described its collapse as sudden, with failures at interconnected crypto firms making the impact worse.

Commenting on AI in financial markets, Johnson warned that it could enable fraud and cyberattacks. She urged stronger rules for the sector to protect investors. Sworn in as a CFTC commissioner in March 2022, Johnson announced she will return to academia after resigning.

CFTC commissioner leaves, warning of digital asset risks