Keynote Remarks at American Cotton Shippers Association Annual Convention

Good morning and thank you for that kind introduction. It is an honor to be with the men and women who provide our country and the world with clothes, textiles, and medical supplies from American grown cotton.

As is customary, I must note that the views I share today are my own as Chairman and don't necessarily reflect those of the Commission.

As we prepare to celebrate America's 250^th anniversary, we have a unique opportunity to reflect on what has made this country exceptional for nearly two and a half centuries. We often think about the founders who signed the Declaration of Independence or the soldiers who fought for our freedom, but we should also remember the farmers, ranchers, producers, and agricultural businesses that have sustained this nation every step of the way.

Long before there was Wall Street, there was Main Street. Long before financial markets became digital, there were producers taking risks with the weather, crops, prices, and their livelihoods every season.

For 250 years, businesses like yours have proven that domestic cotton production is critical to our national security and our family farms and ranches are the backbone of this great nation. Whether it is cotton producers across the south or merchants seeking to buy and move product using our markets, the work you do for the United States and the world is crucial to our survival.

I was reminded of that recently during a farm tour through my home state of Florida. I spent time with cattlemen, specialty crop farmers, and sugar producers who welcomed us onto their land, showed us what modern agriculture production looks like, and explained the challenges they face on a daily basis. What struck me was how producers and agricultural businesses embrace innovation to enhance their yields, protect the environment, and improve the efficiency of their operations.

During my agriculture visits in Florida last month, I had the opportunity to experience sugarcane harvest and processing for the first time. For sugar production, the farmers explained the need for precision agriculture, regenerative soil practices, proper pest and disease control, and suitable weather conditions. They need daily burn permits from the government to burn the cane, preparing it for harvest. Sugarcane production is not an easy feat by any means, and a lot of the ideal planting and harvesting conditions are out of their control. Then there's considerations for refining, storage, and transportation of the final product.

Technology is everywhere. Farmers are incorporating precision agriculture technologies to improve crop production and yields through data analysis, specific fertilizer, nutrient, and pesticide applications, as well as to monitor the weather and control irrigation. Broadband technology enhances equipment productivity, incorporating GPS systems into combines and harvesters, which allow producers to be as efficient as possible.

As technology and data advances, our farmers have better control over their inputs - using just the prescribed amount of feed, fuel, or fertilizer - to then maximize their bottom line.

But technology cannot, and will not, replace everything. Agriculture production still requires long hours working in the heat of the summer and the chill of winter and on weekends and holidays, waking before the sun rises and often working through the dead of night. Farmers are still operating equipment to plant and harvest crops, and making decisions not based on technology - but on generations of knowledge and experience.

I saw firsthand the uphill battle they face on a daily basis. Their struggles with various input costs and weather dependent yields, emphasize the need for strong and effective risk management tools, like the futures and options we regulate at the CFTC, and advanced technology to analyze peak conditions and operate their equipment in the most efficient manner.

During my trip, we also went to a family-owned cow-calf operation, where I learned more about the cyclical nature of cattle production and how the market naturally contracts and expands over roughly a ten-year period based on the size of the herd. This process directly ties into the live and feeder cattle contracts on the exchanges and impacts prices for both the producer and consumer.

The time and planning required to have a successful herd or high yielding crop never ceases to amaze me. Seeing production agriculture firsthand from those who run these operations demonstrated the important role that innovative technology plays in keeping your farms, gins, and businesses running.

Innovation is not coming to agriculture soon. It's already here. But even with all that technology, at the center of every operation what we saw was still a family business and producers working to feed our great nation.

Technology may change the tools you all use, but it does not replace the people. At the CFTC, that matters.

Our job is not to force change for the sake of change. Our job is to make sure innovation works for the people who use these markets every day.

We can utilize the best of both worlds. We want innovation, better tools, stronger markets, and broader access. But we are not going to turn everything over to robots and blockchain systems without considering the real-world impact on farmers and producers.

Markets work best when they serve people, not the other way around. That's why at the CFTC, we're focused on balancing innovation with the day-to-day realities of American agriculture.

Many of you have probably heard me say before that the CFTC will not take a "one-size-fits-all" approach to innovation in our markets. And I will continue to stand by this.

What works for newer, innovative markets, like crypto assets and prediction markets, may not be suitable for traditional asset classes, like agriculture.

As you may know, last month, the Commission took steps to approve narrowly curated perpetual contracts on bitcoin, and similar crypto assets, so that they can be listed on a CFTC-registered exchange as a futures contract.

Perpetual contracts are a type of derivative contract that does not have an expiration date, trades continuously on a 24-7 basis, and is intended to achieve price parity through a pricing mechanism, called a funding rate.

The Commission's recent action on perpetuals is limited to crypto perpetual contracts with deep, active, and continuous spot market trading. As I hope the many forms of actions made clear, I do not believe that the perpetual instrument is suitable for all asset classes, especially in products like agriculture.

To further express this sentiment, the Commission released several additional documents in tandem with the bitcoin perpetual contract order, to make it crystal clear that if registrants want to make any moves concerning perpetual futures outside of the crypto context, they will need to speak to the Commission first.

We fully recognize and understand that 24-7 trading and the perpetual model is not a natural fit for traditional commodity markets, like agriculture, that observe limited trading hours and rely on physical delivery.

I hope this provides everyone in the agriculture community reassurance that your feedback matters to us; and that we are listening. The Commission takes the concerns of traditional market participants on perpetuals very seriously.

Another area we have taken action in is prediction markets. The products traded on these markets are frequently referred to as event contracts, and they've existed in CFTC-regulated markets for decades. Event contracts are typically structured as swaps, putting them comfortably within the CFTC's regulatory authority.

These contracts are often based on yes or no scenarios. The most widely utilized contracts are for sports, elections, and political events. But as you all probably know, there are now event contracts on traditional commodities, like agriculture, energy, and metals.

Prediction markets can serve as a critical risk management tool, mitigating risk, and providing competition in the marketplace, which can drive down costs for consumers.

However, as I stated before, it is not a "one-size-fits-all" proposition.

This is why I have strongly advocated for exchanges to limit trading hours for agricultural commodity contracts to match traditional trading hours.

I also continue to emphasize the importance of working with agriculture stakeholders and industry to provide the best product for all users that does not negatively impact the agricultural community. Your concerns are being heard.

When the contracts are drafted and executed with limited trading hours, producers have an additional tool in the toolbox to hedge their risks.

These markets affect family businesses, crop plans, and entire rural communities, and they are crucial to the survival of America's farmers. All of you in this room deserve a regulator who understands that.

At the same time, we cannot ignore the fact that the broader financial system is evolving rapidly. We saw this with blockchain technology. We saw it with crypto assets. We see it now with discussions around 24-7 trading.

The answer is not to reject innovation outright like we have seen from previous administrations. The answer is to ensure innovation remains a part of traditional finance in a way that strengthens our markets. America has the best commodity derivatives markets in the world. They are liquid, transparent, resilient, and importantly, they were built around the needs of those who use them the most.

Rest assured: although the Commission has taken recent actions in the crypto assets space, our roots are in regulating agricultural markets, and we are just as focused on ensuring that regulation works for our traditional markets as on modernizing our rules for markets on the new frontier.

Under my leadership, the CFTC will preserve those strengths while modernizing responsibly. To do so, we will make sure farmers continue to have a seat at the table. Our doors are open. If there are issues affecting your business, we want to hear about them. If clearing costs are too burdensome, let us know.

If regulations are limiting access to our markets or reducing competition, we want to better understand those impacts.

That is why I have worked to revive the CFTC's Agricultural Advisory Committee to ensure traditional market participants have input and feedback on the regulatory issues and policies affecting them everyday. Our first meeting is next month, and we are excited to sit down in a roundtable format and hear from our members, several of which are with us here today. The Ag Advisory Committee will generate a report of findings for the Commission to consider regarding topics we discuss - such as opportunities to enhance risk management tools, capital requirements such as the Basel III endgame proposal, the Commitments of Traders report, 24-7 trading, and much more.

The Ag Advisory Committee's work will be influential in guiding future decision-making at the CFTC. The people using these markets every day should help shape the future of these markets.

That brings me to another opportunity for engagement with the agricultural community. Under my leadership, we are bringing back AgCon, the Agricultural Commodity Futures Conference hosted by the CFTC and Kansas State University, which will be in Kansas City this October. AgCon is a great event for the agency to hear directly from agricultural leaders across the country on how we can best serve the agricultural industry. Mark your calendars and we hope you will join us in October.

To ensure we are prioritizing and hearing from the agricultural community, I have hired the first ever Senior Agricultural Advisor to the Chairman, and she keeps me updated on your needs and those of the agriculture industry as a whole.

From a policy making standpoint, we have been busy at the CFTC evaluating the results of the Request for Comment on the Commitments of Traders, or COT, report.

ACSA has played a key role in providing strong feedback and recommendations for improvement of the report, including publishing it twice a week. We are evaluating our internal processes and data to provide a pathway forward to enhance the report for all market participants. Thank you all for your engagement on COT.

One of my main goals here at the CFTC is to avoid the implementation of unnecessary and ineffective regulatory burdens, like those put on futures commission merchants (FCMs) and swap dealers after Dodd-Frank. We've seen the number of FCMs significantly decline, particularly those that serve agricultural producers. Farmers should not have to pay larger fees to hedge their risks just to comply with government regulations.

A great example of this is the Basel III proposal from the Biden administration. Capital rules should not unintentionally reduce liquidity, push producers and hedgers out of the marketplace, or increase the cost of clearing.

That is why I have worked together with the prudential regulators to develop a new, less burdensome Basel III proposal that aims to streamline regulations and reduce capital requirements. We are focused on ensuring continued access to American derivatives markets, because efficient access to risk management tools is critical for everyone in the room and the agricultural economy as whole. Farmers should be able to hedge risk without excessive or unnecessary expenses - that is common sense.

As we seek opportunities to enhance risk management tools for row croppers, livestock producers, and agribusinesses, we are strengthening our roots by ensuring the CFTC's relationship with the U.S. Department of Agriculture (USDA) remains strong.

Before the CFTC was formed in 1974, its functions were housed in the USDA as the Grain Futures Administration, and then the Commodity Exchange Administration, dating back to the early 1920s and 1930s. This is the time when clearing members began to report their large trades and open market positions. And the Administration began to publish annual reports of data, similar to the CFTC's current Commitments of Traders reports.

Building upon our roots, the CFTC is currently working on a draft memorandum of understanding (MOU) with the USDA. The purpose is to strengthen collaboration efforts and information sharing between the two agencies to better serve all of our constituents, which are America's farmers, ranchers, and agribusinesses.

We are also continuing to focus on ensuring there are markets available for a wide range of crops and products that producers need. Agriculture in America is diverse. The needs of cotton producers are different from livestock producers. A one-size-fits-all policymaking approach does not work, and my staff and I understand that.

That's why engagement with the industry matters, and that's why visits like the one we recently had in Florida are vital. I look forward to hopefully joining some of you on your farms, at your cotton gins, and at your businesses soon as well.

Between ongoing droughts, Brazil dumping products into our markets, cheap imports of synthetic fibers from Asia, and high input costs, I know it has been a tough year for many of you. Rest assured, the Trump administration and the CFTC realize the situation. If there are ways we can make your lives easier while still preserving market integrity and protecting participants, we will seriously consider them.

As I prepare to close, I want to reflect again on something I saw repeatedly during my recent farm tour. The balance between innovation and tradition is exactly what America, and farmers, do best. We do not move backward, but we also do not abandon the foundations that make us strong.

On the eve of our nation's 250^th birthday, we're reminded that the future of agriculture will include technology, data analytics, modernized markets, and much more. But it will also continue to rely on hardworking Americans willing to wake up early, work the land, take risks, merchandise, and ship crops for not only our country, but the world.

I'm proud the CFTC will continue working to ensure our markets support both innovation and the people at the heart of American agriculture.

Thank you.