CFTC Commissioner Johnson proposes an AI regulation framework, increased penalties for misuse, and task force creation at the TAC meeting.
Commissioner Kristin Johnson of the United States Commodity Futures Trading Commission (CFTC) recently introduced three regulatory proposals about artificial intelligence (AI) technologies in the context of U.S. financial markets.
During a presentation at the Technology Advisory Committee (TAC) meeting on May 2, Johnson detailed the CFTC’s three-pronged agenda.
This agenda includes the creation of a task force to “evaluate, assess, and harmonize guidance, supervision, and regulation that addresses the increasing integration of AI into financial markets,” the establishment of a “principles-based framework” to assess the risks associated with integrating AI into financial markets, and heightened penalties for the intentional misuse of AI.
Although there is no novelty to government demands for investigatory task forces and commonsense risk assessment platforms, Johnson’s claim that offenses facilitated by AI should be punished with “heightened penalties” would substantially disrupt the current legal structure.
Johnson cited a prior address by U.S. Deputy Attorney General Lisa Monaco, in which she stated, “Since firearms increase the risk of crime, the severity of punishments increases when they are used to commit offenses.” AI, like firearms, can increase the severity of a criminal offense.
Johnson argues that the emergence of AI technologies and their susceptibility to abuse warrant comparable consideration.
“To address these concerns, the Commission should introduce heightened penalties for those who intentionally use AI technologies to engage in fraud, market manipulation, or the evasion of our regulations. Bad actors who would use AI to violate our rules must be put on notice and sufficiently deterred from using AI as a weapon to engage in fraud, market manipulation, or to otherwise disrupt the operations or integrity of our markets.”
The speech by the commissioner follows the appointment of Ted Kaouk as the first Chief AI Officer of the CFTC. Before this, Kaouk held the positions of Chief Data Officer and Director of the Division of Data at the CFTC.
In a recent correspondence to U.S. President Joseph Biden, Ranking Member of the Financial Services Committee Congresswoman Maxine Waters, he was advised that Johnson should be confirmed as Assistant Secretary for Financial Institutions at the U.S. Department of the Treasury.
If elected and nominated, Johnson would significantly impact the implementation of policies and legislation pertaining to the United States financial market.
