What Can the CFTC Do About It?

• During April, we saw early signs of the new generation of “traders” moving into the commodity complex, most notably SRW wheat.

• Late in the month, there were calls for the CFTC to rein in predictive market websites and “insider trading”. Interestingly enough, due to budget cuts made by the current US administration, this is unlikely to happen. 

• With trade in the commodity complex lurching toward meme stock status, it's doesn't look like it will end well for those still trying to use markets as a way of passing price risk up the ladder. 

In late April (2026), I had the opportunity to visit with Michele Steele of StocktwitsTV regarding my recent writings on 1) The evolution of markets being driven by headlines rather than real fundamentals, 2) The predictability of what those headlines will be based on 3) The current US administration’s ability to manipulate markets (any sector) based on social media posts. As we talked about, and as I’ve said in numerous other interviews and conversations, the ongoing insider trading based on the timing of the US president’s social media posts is unprecedented. At least in modern day US history. The thought I usually leave audiences with is to point out the irony of the situation: Folks who were up in arms over Hillary Clinton’s skill and/or luck as a cattle futures trader have been silent as a stone (no, not a Rolling Stone) about what’s going on these days. 

As the story behind a new generation of “trader” was being introduced to the commodity complex by way of countless predictive market websites, one of the first questions that came to my gray-haired head was how would these sites be regulated? Back in my day as a Series 3 broker, there used to be seemingly heavy oversight by government agencies for any trade in the commodities sector. (I say “seemingly” because history is still filled with trading and investing interests finding their way around the regulators.) As I mentioned in a previous piece, the threat to the commodities complex was that this new generation of trader/gambler could turn any market into the next meme stock, or worse yet another bitcoin. (I’ll say it again, bitcoin is the one market that makes natural gas look like Treasury bonds, due in part to the former also being unregulated and unbacked financially.) 

Speaking of natural gas (NGM26), recall two of the markets mentioned in the piece about predictive market websites was the famed Widow Maker and Wheat (aka Poverty Grass). If we look at the daily chart for the July SRW futures contract (ZWN26), the more heavily traded issue in the heaviest traded futures market, we see July posted an April low of $5.7775 on April 10 before rallying to the monthly high of $6.7150 on April 29. The initial Barrons piece was posted on April 15. Over that 3-week time frame July SRW gained 93.75 cents (16.2%), while open interest in July jumped from 170,543 contracts (April 10) to 246,685 contracts (April 29), a gain of 76,142 contracts (45%). Was the move fundamentally driven? The July-September futures spread moved from a carry of 12.25 cents at the close of April 10 to a carry of 13.75 cents on April 29. More importantly, the spread covered 76% calculated full commercial carry on April 10 and 82% on April 29. The bottom line is a key read on real fundamentals grew more bearish as traders continued to buy. 

This was all brought to mind late in the week due to a couple headlines: 

• From CNBC.com: Democrats urge CFTC to rein in prediction markets sports betting, insider trading
• From ESPN: NBA asks regulator (CFTC) to tighten restrictions on prediction markets

Think about what is being asked of CFTC, to increase regulation of prediction markets betting, notably in sports. One doesn’t have to watch a sporting event on television long to be bombarded with commercials promoting sports betting sites. Another set of headlines that we’ve seen blossom of late has to do with all the betting scandals running the gamut of US (world?) sports. 

But it’s the other part, tacked onto the first headline, that grabbed my attention. Democrats are wanting the CFTC to rein in…insider trading. Now consider this: The current US administration cut the CFTC’s workforce by a reported 25% by April 2026, interestingly enough just as more insider trading was being seen on a predictable basis. Saying the current US administration is not interested in increasing market oversight is an understatement. We’ve seen this game evolve over the past decade. Between 2016 and 2020 we watched the learning curve as the White House would release wild statements, then sit back and watched how markets driven by algorithms reacted. Having learned, these wild statements and social media posts are designed to create specific market reactions. All fueled by the growing predictive market industry. 

How does this end? As I said Michele toward the end of our conversation, it’s not going to end well for 1) investors who are late to the party or 2) hedging interests still trying to use commodities as a way of passing price risk up the ladder. It might’ve been 30 years ago now, back in the mid 1990s if I recall, when there was a move to create more over-the-counter cash trade in commodities as an alternative to holding positions in the increasing volatile futures markets. It would not be a surprise to see renewed interest in such tools.

Lastly, a couple things of note are happening this weekend. The 152nd running of the Kentucky Derby takes place on Saturday, May 2, one of the most heavily betted sporting events in the US each year. Perfect timing, right? The Berkshire Hathaway annual meeting will be held in Omaha this Saturday as well. It will be different this year as Warren Buffett will not take the main stage, and his partner Charlie Munger passed away in 2023. I would like to hear what Mr. Munger, legendary for speaking his mind, had to say about the unregulated market situation we have today.