The U.S. Commodity Futures Trading Commission is investigating at least three firms for oil futures trades on March 23 that yielded over $15 million in profit, placed just before a market-moving announcement on the Iran ceasefire, the Wall Street Journal reported.
The probe scrutinizes trades made just before former President Trump announced an extension of the ceasefire, an event that caused a significant shift in oil prices. The investigation comes as regulators increase their focus on prediction markets and derivatives tied to political and military events, where platforms like Polymarket and Hyperliquid have seen surging volumes.
"These guys get along great," one regulatory insider who knows both men told On The Money, referring to the close working relationship between Securities and Exchange Commission Chair Paul Atkins and CFTC Chief Michael Selig, which sources say is creating a streamlined approach to such probes.
This investigation represents a critical test for the newly collaborative SEC and CFTC, potentially setting a precedent for how the U.S. will police insider trading and market manipulation in the burgeoning event-based derivatives market, with significant implications for market integrity.
A New Regulatory Alliance
The current probe is one of the first major tests of a newfound cooperation between the SEC and CFTC. Historically, the two agencies have engaged in turf wars over jurisdiction, particularly concerning cryptocurrency regulation, which created an uneven and often ineffective regulatory framework. Under the leadership of Atkins and Selig, the agencies have reportedly brokered a "peace accord" to clearly delineate responsibilities and enhance cooperation on enforcement.
According to regulatory insiders, the two chiefs have been meeting regularly to map out jurisdictional boundaries. The CFTC will lead on so-called event contracts, which have become popular for speculating on everything from sports to war, while the SEC will oversee derivatives tied to stocks and bonds that are defined as securities. This collaboration is expected to result in more thorough and effective investigations into suspicious trading activity across markets.
Scrutiny on Prediction Markets
The investigation also casts a spotlight on the rapidly growing world of prediction and decentralized derivatives markets. Incumbent exchanges like the Intercontinental Exchange and CME Group have reportedly voiced concerns to the CFTC about unregulated platforms such as Hyperliquid. They argue the pseudonymous nature of these platforms could facilitate insider trading and price manipulation, particularly in sensitive commodities like oil.
Since conflict erupted in the Middle East, Hyperliquid has seen over $21.5 billion in notional trading volume on perpetual futures tied to Brent crude. The CFTC itself has been aggressive in asserting its federal authority over these markets, recently suing the state of Minnesota to block a law that would have criminalized participation in CFTC-regulated prediction markets. The agency argued the law would harm farmers and other professionals who use these markets to hedge risk. However, the potential for misuse remains a primary concern, as evidenced by the recent charges against a U.S. Army intelligence officer for allegedly using insider knowledge to profit on Polymarket.
This article is for informational purposes only and does not constitute investment advice.
