Regulatory Failure: The CFTC and the Trump Family's Crypto Business

Original Authors: Sharon LaFraniere, David Yaffe-Bellany, New York Times

Original Compiled by: Saoirse, Foresight News

Last fall, a battle of interests quietly unfolded within an obscure federal agency. Three companies with ties to the Trump family business empire sought approval from the U.S. Commodity Futures Trading Commission (CFTC) to expand their operations in the high-heat prediction market sector.

Prediction markets are now a rapidly growing segment of the agency's regulatory purview. Americans can bet on various events here, ranging from the color of the tie President Trump will wear next to whether the U.S. will take over Cuba. This market holds immense business potential, but the operational methods of several companies have also sparked considerable controversy.

Senior career officials at the agency had reservations: they worried that Crypto.com was not treating small-stakes users fairly; they believed Polymarket's anti-fraud protections were flawed; and the third company, a subsidiary of the cryptocurrency firm Gemini, had not even passed the compliance reviews required to begin operations.

Multiple sources, speaking on condition of anonymity for fear of retaliation, said that despite internal objections, the then-acting Chairman Caroline D. Pham and her chief legal counsel intervened to help these companies achieve their goals.

By Christmas Eve, the agency suspended two senior managers who had questioned the companies, barred them from the office, and launched internal investigations into them. Three other senior officials involved in cryptocurrency-related enforcement work received the same treatment. The crypto industry is also closely linked to the Trump family.

These officials were never told what they had done wrong. But current and former employees said in interviews that the incident sent a clear signal to all agency staff: do not cause trouble for these industries.

A New York Times investigation reveals that the core agency responsible for regulating a niche financial sector has repeatedly been sidelined by the powerful interest groups it is supposed to oversee. The suspension and investigation of the officials involved is just one example.

The investigation found that over the past 16 months of the Trump administration, the commission has steadily reduced its workforce, purged senior career staff, sharply curtailed enforcement actions against the cryptocurrency industry, and facilitated the operations of prediction market companies in various ways.

The deep entwinement of the Trump family with the cryptocurrency and prediction market industries is a major reason for the significant weakening of the regulator's functions. The Trump family has amassed a fortune by issuing its own digital currency and has also entered into business partnerships with several prediction market operators.

Several senior figures who drove the commission's transformation themselves have financial ties to these industries. After leaving her post, Caroline D. Pham joined a cryptocurrency company that partnered with Polymarket; her chief legal counsel, Brigitte Weyls, was hired by a prediction market company whose business application she had previously helped facilitate.

The current 36-year-old Chairman, Michael S. Selig, previously represented numerous cryptocurrency companies as a corporate lawyer and was deeply involved in prediction market-related business. Appointed by Trump and affiliated with the Republican Party, he is currently the sole commissioner, as the president has left other seats vacant.

This highly unusual personnel arrangement gives Michael S. Selig the sole authority to file lawsuits, propose new regulations, and fully oversee these two industries at the core of the Trump business empire.

White House spokesperson Davis Ingle stated: "Every decision President Trump makes is in the best interest of the American people, and there is no conflict of interest involved."

The regulator's shift in stance also confirms how the Trump administration is forcing originally independent regulatory agencies to bend to its will, a change seen similarly at the U.S. Securities and Exchange Commission. Now, both agencies agree with the president's view that past regulators were overly harsh in penalizing various industries.

Gretchen Lowe, who spent three decades at the agency and retired last year from a senior enforcement role, said, "I've been through multiple Republican and Democratic administrations. In the past, everyone believed enforcement had to be strict. This is the first time political factors have affected the CFTC so dramatically."

Both Caroline D. Pham and Brigitte Weyls did not respond to requests for comment. However, Caroline D. Pham publicly criticized the agency's enforcement division last year for abusing prosecutorial discretion.

Polymarket stated it has robust risk protection mechanisms in place; Crypto.com said it strictly complies with all federal regulations; Gemini did not respond. A CFTC spokesperson declined to comment on the treatment of the implicated employees or the agency's handling of specific cases.

With regulatory power weakened, millions of people involved in cryptocurrency trading and prediction market betting, along with the increasingly interconnected overall financial system, are exposed to risk. These two industries have consistently struggled with fraud and misconduct: scams are rampant in cryptocurrency, and insider trading is a major problem in prediction markets.

In an interview, Michael S. Selig said that during the Biden administration, the commission's enforcement went too far, taking even minor violations to court. He emphasized that the agency will now focus on prosecuting major illegal activities and will not favor any side.

He stated: "Whether in cryptocurrency or other areas, once fraud, market manipulation, misconduct, or insider trading occurs, our enforcement division will pursue it diligently and fulfill its duty."

However, this strong statement starkly contrasts with the agency's actual enforcement record during Trump's second term. The commission has filed only two digital currency-related cases so far, both targeting individual operators, without taking action against any major cryptocurrency companies.

In contrast, during the Biden administration, there were over 80 related cases, handled either through civil courts or administrative channels. Even during Trump's first term, before his family heavily ventured into cryptocurrency, the commission handled over 20 related cases.

In the realm of prediction market regulation, the commission has shifted from regulator to industry ally amid legal disputes over industry compliance. Since the start of Trump's second term, the agency has filed only one case, against an individual accused of insider trading.

The CFTC was originally established primarily to oversee misconduct in agricultural commodity markets like pork bellies, but its regulatory responsibilities have expanded while enforcement efforts have consistently retreated.

Prediction markets, now booming, fall under speculative financial transactions and are within the agency's regulatory scope. The two major platforms recorded a total transaction volume of $50 billion for the entire year of 2025, but in just March and April of this year, they reached that same volume.

The White House is currently pushing for legislation to further expand the commission's regulatory authority, giving it more oversight responsibilities in the cryptocurrency field.

Meanwhile, the Trump administration continues to cut agency staff. The department was already lean, peaking at about 760 employees in 2015. By March of this year, the number of active staff was only about 550, the lowest since the depths of the 2009 financial crisis.

Crypto: A Full-Scale Retreat in Enforcement

In February 2025, one month into Trump's presidency, several lawyers at the CFTC were enjoying the Presidents' Day long weekend. Some were relaxing in a white ski chalet in a Vermont ski town, others were attending a classical concert in New York.

Abrupt ringing mobile phones disrupted their holidays. The caller was the head of the agency's enforcement division, Brian Young, relaying an order from Caroline D. Pham.

Caroline D. Pham, 45, had interned at the agency early in her career, had a broad network, and had long moved between government and the financial industry. In 2022, when a Republican seat opened on the bipartisan commission, President Biden appointed her as a commissioner.

After Trump elevated her to acting chair, she became bold, often posing for photos with executives from the industries she regulated. The order she gave that holiday weekend was both surprising and difficult to execute: she instructed the legal team to drop the agency's lawsuit against the cryptocurrency company KuCoin.

For an already small commission, this was a significant case.

During the Biden era, most cryptocurrencies were regulated by the SEC, which treated them like stocks and bonds traded on Wall Street. However, the technical nature of cryptocurrencies gave the CFTC regulatory authority over some speculative trading, including trading in Bitcoin, the world's largest digital currency.

Previously, the commission had fined the world's largest cryptocurrency exchange, Binance, $1.35 billion, a landmark case in the industry. Suing KuCoin was also an important step in signaling the agency's tough stance on cryptocurrency regulation.

KuCoin, headquartered in the Seychelles, had just pleaded guilty in a lawsuit brought by the U.S. Department of Justice, agreeing to pay nearly $300 million in fines. The DOJ accused the platform of ignoring laws against combating crime and preventing illegal transactions. Concurrently, KuCoin had also agreed in principle to settle a CFTC lawsuit accusing it of operating without a license.

Caroline D. Pham lacked the authority to unilaterally drop the case; it required a majority vote of the commissioners. But with two Democratic commissioners still in office, her chances of success were slim.

Faced with this, the legal team chose a compromise: they renegotiated the settlement agreement and cited Trump's executive order in court, which called for a more accommodating approach to the cryptocurrency industry.

While negotiations were ongoing, KuCoin announced the listing of two new digital currencies issued by World Liberty Financial, a cryptocurrency startup owned by the Trump family. The new listings significantly boosted the family business's industry profile and helped expand its user base.

The case was repeatedly delayed until March of this year, when the CFTC finally reached a settlement with KuCoin. The parent company of KuCoin was ultimately fined only $500,000, far less than the multi-million dollar penalty the legal team initially estimated.

KuCoin issued a statement saying that listing World Liberty Financial's tokens was simply a normal business arrangement and unrelated to its own litigation. A spokesperson for World Liberty Financial also stated that the company's digital currency is listed on multiple exchanges.

According to official documents and former employees, the commission also dropped investigations into at least five other cryptocurrency companies, including late-stage reviews of a major exchange.

In the spring of 2025, Caroline D. Pham's team launched investigations into three senior enforcement officials handling cryptocurrency cases, creating an atmosphere of fear throughout the division. The three were Gretchen Lowe, Chief Counsel and First Deputy of the Enforcement Division; Manal Sultan, Deputy Director of Enforcement; and K. Brent Tomer, Chief Trial Attorney.

The official reason given for the investigations was vague, simply cited as "improper handling of certain enforcement matters."

Subsequently, the government dismissed Manal Sultan and K. Brent Tomer as part of downsizing; two trial attorneys handling cryptocurrency cases were demoted, and Gretchen Lowe resigned.

Multiple former agency officials stated in interviews that Caroline D. Pham's actions were deliberately targeting legal personnel handling cryptocurrency cases. Former trial attorney Andrew Rodgers, who left last year, said, "Someone has been deliberately sidelining the enforcement staff handling major cryptocurrency cases."

Former Chicago office attorney Joe Konizeski stated that before being laid off last summer, he was twice instructed to terminate investigations into cryptocurrency operators.

He commented: "The CFTC's attitude effectively tells violators in the cryptocurrency space that regulators will no longer hold them accountable."

The President Personally Intervenes

For Gemini, the timing of the regulator's enforcement retreat was too late. In January 2025, just before the trial was set to begin, Gemini reached a settlement, paying a $5 million fine. The agency had previously accused the company of misleading CFTC staff during a Bitcoin auction.

However, Gemini avoided other potential consequences that could have arisen from the case.

Gemini's founders, Cameron Winklevoss and Tyler Winklevoss, are favored by Trump. They are political donors, sponsors of White House events, have invested in a private club owned by Trump's eldest son, Donald Trump Jr., and have also contributed financially to a cryptocurrency venture co-founded by another Trump son, Eric Trump.

In the settlement agreement, Gemini did not admit to any wrongdoing and promised not to publicly claim the allegations were baseless. Yet, just five months later, the company filed a complaint with the agency's Inspector General, criticizing the case and the legal personnel involved.

Tyler Winklevoss posted the complaint on X, accusing: "These public officials abused their power, wasting millions of taxpayer dollars to file a meritless lawsuit against Gemini, solely to advance their own careers."

Sources say the Winklevoss brothers did not stop there and attempted to use this complaint to influence the appointment of the agency's top leader.

While Caroline D. Pham served as acting chair, Trump nominated Brian Quintenz in February 2025 to lead the agency. Quintenz, a former commissioner, was also a director of a prediction market company. But in September, he announced on social media that his nomination had fallen through because he refused to pledge support for Gemini's complaint against the commission.

Brian Quintenz made some private chat records public, in which Tyler Winklevoss demanded that Quintenz prioritize Gemini's complaint, saying he would be "happy to personally raise this with the President."

Quintenz wrote that after he refused to comply, the Winklevoss brothers complained to Trump. At the end of September, Trump formally withdrew his nomination.

A Gemini spokesperson at the time declined to comment on the chat records. The White House spokesperson stated the president only nominates individuals whose philosophy aligns with his administration's policies and who put America first. Michael S. Selig did not comment on Gemini's complaint.

Multiple Interventions in Regulatory Approvals

Gemini had more requests pending.

Its subsidiary, Gemini Titan, had been trying to enter the prediction market since 2020 but had never received commission approval. Last year, Gemini submitted another business application.

In December last year, as staff were reviewing the application, they received a special memo signed by Brigitte Weyls, directly recommending approval of the application.

Normally, such approval recommendations would be drafted by front-line staff and submitted up to the commissioner through proper channels, and the review was still ongoing. Despite this, Gemini Titan's application was quickly approved.

According to sources, this was just the third case where Caroline D. Pham and Brigitte Weyls successively intervened to help prediction market companies cooperating with the Trump family.

At the start of Trump's second term, Crypto.com had already obtained a license to operate prediction markets. However, a brief note in a public filing by the company raised concerns among some staff members. They suspected that Crypto.com was giving preferential treatment to large institutional traders, giving them an edge over regular sports bettors, without properly disclosing this practice.

Sources said that Caroline D. Pham and Brigitte Weyls not only discouraged staff from further investigating the matter but also excluded relevant personnel from communications meetings with Crypto.com.

Crypto.com's management declined to comment on the details of communications with the commission, stating that the company's operating rules are transparent, all users have a fair environment, and its information disclosure is fully compliant.

Crypto.com is a close business partner of Trump Media & Technology Group, whose largest shareholder is Trump himself. The two parties reached an exclusive cooperation agreement last October to jointly develop the prediction market business. Trump Media & Technology Group did not respond to requests for comment.

The most far-reaching events revolved around Polymarket. Over the years, this enterprise has been repeatedly questioned by regulators for compliance issues. In 2022, Polymarket paid a $1.4 million fine to the commission for allowing U.S. users to place bets without authorization.

In November 2024, after the U.S. election betting frenzy, past cases were revisited. The FBI raided the New York home of founder Shayne Coplan, and the CFTC simultaneously launched an investigation.

In July of the following year, the Trump administration dropped both investigations. That same month, Polymarket acquired a compliant company, using it to launch a new platform for U.S. users.

The following month, Polymarket submitted a new application, seeking approval to accept bets through intermediary channels. While this model could help the company expand its customer base, it could also allow violators with inside information to hide their tracks and evade regulatory detection.

Less than two weeks after submitting the application, Polymarket announced an investment from 1789, a firm partially owned by Donald Trump Jr. The company also hired Donald Trump Jr. as an unpaid advisor. A spokesperson for Donald Trump Jr. said he was not involved in Polymarket's affairs with federal regulators.

Last fall, even as the U.S. government experienced a government shutdown lasting about six weeks, the commission still convened staff to process Polymarket's application.

During a communication meeting between the two sides in November, Rahul Varma, the acting head of the market surveillance division, and Rachel Berdansky, the deputy director of the compliance division, questioned the adequacy of Polymarket's anti-fraud protections. Brigitte Weyls was also present at this review meeting, which was unusual.

The week Polymarket's application was approved, Rachel Berdansky was placed on administrative suspension and subjected to an investigation; she has since officially retired. By the end of last year, Rahul Varma was also purged.

Vince McGonagle, the former head of the division who had been reassigned after previously delaying Gemini's application, also left the agency after being suspended.

Last year, a large number of employees left, reducing the total agency workforce by about a quarter, the largest annual staff attrition in nearly two decades. Despite the reduction, the commission's spokesperson maintained that the remaining staff are sufficient to fulfill regulatory duties.

Caroline D. Pham and Brigitte Weyls subsequently left public service and joined companies regulated by the agency. A senior commission official stated that both personnel moves complied with federal ethical standards.

In March of this year, Brigitte Weyls officially became General Counsel for Gemini Titan, the very company she had previously helped push through approval. Caroline D. Pham stepped down as acting chair in December last year, joining the cryptocurrency company MoonPay, which also plans to enter the prediction market and had already announced an exclusive partnership with Polymarket.

A New Regulatory Landscape

Michael S. Selig, who took office last December, became the sole top leader of the commission.

After other commissioners left, Trump only appointed him to succeed them, leaving all other seats vacant. This practice broke the existing system of checks and balances within the commission and gave