Conference Transcript - IONQ 2026-11-11

Frank W. Backes, CEO

We are very lucky to have Chairman Selig here. We were going to have Chairman Atkins as well, but he's out of the country. Fortunately, I don't think we're going to have to worry too much about if we go over the line between futures and securities, because Michael Selig has also been a securities regulator and a securities lawyer. But also, we have been told that the turf wars are over between the agencies. There is some proof of that, and we can discuss it. I did think we should start with whether it's the administration's view or the agency's view about America as a continuing to be, we think, the best place for innovation and Investments, including with respect to financial products. I still think we have a situation where no one's claiming that Europe is improving. There is, for better or for worse, Sinophobia with respect to what otherwise would be the next economic competitor. Do you have a view in which you can talk to folks here about the election? And to what extent should our guests here, investors and innovators, be concerned at all about What's coming?

Michael Selig, Chairman

Well, since its founding, the frontier of America has been its engine of growth. And when President Trump came into office, he had a very clear mandate for me at the CFTC. I actually did start off with the SEC, but coming into the CFTC, my role was really to help generate economic growth to make sure that the frontier of finance is built in the United States. And that includes things like superintelligence, prediction markets, crypto assets, and blockchain technology, and also a wide range of new products. We've been onboarding into the United States things like perpetual futures and other types of novel derivatives. And, you know, for too long, these products have existed entirely offshore. We're bringing them back to the United States. And so the president's going to be in office for a couple more years. I'm a Trump appointee, so I'm going to continue on with that mission. But I do think, of course, we've got a number of new members coming into both the Senate and the House on the Democratic side. And we're going to work together with all members of Congress to make sure that we're doing the best thing for the American people. But my role as a chairman of this agency is to help generate economic growth and to make sure that our markets are well functioning. So the two go hand in hand. We're, of course, very excited about all these new innovations in our markets. And we're happy to see American entrepreneurs building again, creating really innovative things, because that's always been what's set America apart. It's always been the best place in the world to take risks, to build a business, to create new things. And there's always rewards for doing that. And unfortunately, under the prior administration, we saw a lot of firms that said it's not worth taking that risk because we're going to get hurt when we try to launch a new platform or build a new product. And, you know, venture capital is a tough industry as it is, but I think many of the investments that the venture firms were making blew up, frankly, because of bad regulations. So we're bringing good regulation to these new markets and these new products. We're going to make sure that there's responsible innovation in our markets, but we want to see the innovation. We want to see it regulated here in the United States, and just from the outset, if you look at some of these products, the Equity Perpetual Futures launched last week, and they've been very successful in just a week, But the leverage is very different, for example, to offshore markets where you see up to 100x leverage. We've got a more reasonable 6x in that range. So we're going to continue to regulate. We're going to continue to allow for innovation. And we're going to work together with both sides of the aisle to get that done.

Frank W. Backes, CEO

I think most people are very happy, maybe with both the deregulation and the regulation that's going on, but when you mentioned the risk of leverage and the decision to not try to bring onshore excessive leverage, presumably you view that it's partly a systemic risk to those markets and to those investors. What are what are other systemic risks that you are? That you're dealing with, that you see, either you don't want to import them, or you don't want to, you want to find ways of ameliorating those risks.

Michael Selig, Chairman

Well, we have seen a number, especially in recent weeks, of these cyber attacks on offshore crypto exchanges and platforms, and we're also seeing, of course, cyber risk here in the United States. In the United States, we've got very robust standards as an agency with respect to our registrants, so of course, we're making sure that our registrants have cybersecurity controls, have certain safeguards that they've worked with our staff to put in place, and we're, of course, overseeing that, but we don't know what we don't know, so there's a lot of unknown out there, in particular with the onset of new superintelligence models that really are very powerful. So we're, of course, looking at all of that as new platforms come to market, but we can't control what happens offshore. So my vision for these markets has always been, let's get the platforms here in the United States. Let's establish relationships with all of these firms and make sure that Americans have access to the products to the extent they want to trade them, but make sure that there's very robust regulation around that. Because if we just push it offshore into black markets, the stuff doesn't go away. It just comes back We're going to put in place really stringent requirements around cyber and everything else. Other types of systemic risks, they've been there since the beginning. There's always the risk of too much excessive leverage in the system, so we're looking at that sort of thing. What we have in place are controls around, of course, waterfalls and that sort of thing. We've got really stringent requirements around our brokers and our clearinghouses to protect customer funds. That's not a model you see in every case in crypto. We have seen auto-liquidation, for example, and some of these novel types of clearing that we're not averse to, but we want to better understand it. So we're working with a lot of the firms that want to bring that to the United States just to make sure that we have purpose-fit regulations for these new types of clearing mechanisms and brokerage relationships. We have put out a rule proposal related to vertical integration. In crypto in particular, in some of these novel markets, you're seeing a lot of vertically integrated markets, which we don't think is a bad thing. We really like optionality and customer choice, but we also want to make sure that there's the right sorts of controls in place to protect customers.

Frank W. Backes, CEO

One of the new products, um, not... That you sort of imported, we'll say, are the predictive markets. We probably could talk an entire afternoon about predictive markets, and people love to. And they sort of, to some extent, did prove themselves as an incredibly useful source of data, which may or may not translate into everything else we're talking about with respect to investments. And I'm talking about the elections and the prediction markets. But I did want to get your sense. Of what you believe to be the utility of the predictive markets and why you and the SEC have made such a strong effort to study it, ask many questions about it, and started as a trickle and is now much more of a river, bringing it into force.

Michael Selig, Chairman

Before I get to that, I do want to say, as a regulator, my role is not to pass judgment on the merits of any particular product or technology or type of market. Our role as a regulator here in the United States, as a financial market regulator, is not a merit-based one. We look at the products before us, we look at the markets and technologies before us, and so I think the most important point to make with respect to these markets is that there's customer demand. You know, there are people that want to use these markets that are generating returns from these markets, that are utilizing the data that's generated by these markets. And so it's something that there's demand for. And as a regulator, I, of course, have to take that seriously and say, okay, if there's demand for these markets and products in the United States, what sorts of controls and regulations should we put in place to make sure that those that demand the products are protected? So that's my first obligation as a regulator. I do see a lot of utility, and I've spoken quite a bit about this since I came into office, the truth machine nature of these markets. They are very reliable and very accurate at predicting the future, whether it's the most recent midterm elections, the 2024 elections, sporting events. All of these things are very difficult to predict, but yet these markets seem to get it right, and they get it right oftentimes more so than the polling, more so than the news media outlets that have all sorts of stories that they put out on a regular basis. So I think it is a check on some of the media, which is not a bad thing. All of the media organizations are entering into partnerships with these prediction markets and firms utilizing the prediction markets. So I think that is a useful externality that's generated from these markets. And then also, just as an everyday consumer, I believe more people are actually using these apps, things like Kalshi and Polymarket and Novig, to look at the data that's generated. So if they are curious about who's likely to win a sporting event or who's likely to win an election or what the weather will be tomorrow, they might check their weather app or their sports app or their news app, but they might also very likely check their prediction market to get another opinion on that. And I think that's a good thing to have in our society. You know, people are very trusting of experts, and oftentimes the experts get it wrong. And so having a tool that allows for us to check up on our experts and make sure that we're not trusting gurus and people that have all sorts of theories on things, but actually trusting the wisdom of the crowds. And so I do think that's a valuable thing in a society that's becoming, you know, challenging for many to navigate all the new information that's being generated by whether it's, you know, every social media application on their phone or all these new blogs and sources of news. We've got so much more information today than we've ever had, and so having a check on that and having people that are willing on election night to look at, you know, every hour how many Republicans are turning out to the polls versus Democrats and, you know, looking at obscure districts through their... You know, political apps and things like that, and then generating a prediction on that, that's really helpful for somebody who doesn't want to take the time to do that.

Frank W. Backes, CEO

So at Cantor, and I'm sure at... Many other banks, we view the predictive markets as having another use, and it's really somewhat similar to what you see in the futures markets, which is a price discovery mechanism. There does come a point, and people know this from the over-under bets in sports with respect to total score. Eventually, it reaches the point in which it's 50-50. There's a prediction as to what the total score will be. There's a prediction in the futures market as to what three-month-out gold will trade for, people on either side of it. And what we see is now finally an opportunity for, with respect to whether it's economic indicators or other key performance indicators out there, an opportunity for our clients to start to make those kinds of investments, where, again, it could look either way. It could be number of cars sold, subscriptions. It could be what the Fed funds rate will be. So it's set on either side. We think there'll be interest on either side. Both sides are getting what they need, right, along those lines. Not unlike, again, a futures contract, even if it is framed as a binary option, will it be above or below a certain figure?

Michael Selig, Chairman

Yeah, absolutely. I mean, an interesting historical fact about our futures markets is it all started off in trading pits, and so you actually were limited by real estate each time you listed a new product. So we had a handful of different products listed on the trading floor, but over time, everything became electronic, and now it's become app-based, and so there's so much opportunity to list all sorts of novel derivatives instruments and hedge really tail risks or hedge really nuanced risks, and prediction markets are a great tool for that because, You can write an event contract on, for example, how many cars will Tesla produce in a quarter, and so that sort of ability to manage risk and hedge risk really has never existed before, but it's a natural evolution of our markets, and so I do think that's a really important both price discovery function of our markets that's coming to all manner of events, but also it's an area that is going to allow for better risk allocation for any sort of business that is either investing or making decisions. I'm wondering if the Latest is good for the present and that's a very interesting set of elections, based on market conditions.

Frank W. Backes, CEO

So a different administration, perhaps, a different party would before it would allow all of these binary options to develop would call for an economic study. Right, a six to 18 month economic study, what will be the effect of if you're allowing people to not necessarily make an investment directly in a company, but in its segments, in its products, in its earnings, sort of pieces, sort of carve it all up and not necessarily have investments directly in the equity. Do you think such an economic analysis would even be possible? Do you feel there'll still be the opportunity if it turns out there are unforeseeable negative effects you'll be able to adjust, or are you comfortable that the market takes care of itself?

Michael Selig, Chairman

I am a free market guy. I do believe that the markets typically are smarter than all of us. But of course, we're evaluating all these new products. We're evaluating the new markets. The White House has a great Council of Economic Advisors that also looks at a lot of these issues. So we're, of course, working together with our colleagues throughout the administration and also, of course, with the SEC to make sure we get this right. But my tendency is to say, okay, let's see how the markets react. Let's see how these products trade. And a good example of that as well has been the perpetual contracts that many had listed these as perpetual style contracts. So they were effectively long-dated futures, and we saw no issues with them. We saw perpetual contracts trading offshore, and we really studied that data and had no issues with it. So, of course, we're going to do our diligence on all these products, see how they've traded in other places. Many of them, because we've created these black markets throughout the years, many of these products do trade offshore, oftentimes in unregulated venues. And so we have the benefit of that data to see how these products trade, and we can make our decisions based on that.

Frank W. Backes, CEO

So what impression, if any, do you want to leave with our guests, which are, again, innovators and investors, with respect to how they should consider predictive markets with respect to their businesses and their investments? Do you think they should be waiting for the banks to bring them the deck with respect to we can put this together for you? Do you think the CFOs should be out there thinking how they could be a little bit, a way to risk manage on their own? How do you, how do you? And you've been, your agency has been superb in allowing access for people to come in and say, we're considering doing this, what do you think, giving reactions. But if you were to go, what impression do you want to leave people again with how they can use this incredible emerging predictive market area to risk manage their own investments and their own company's growth?

Michael Selig, Chairman

Well, I'm just the regulator, so I'd say consult with your financial advisors and teams on, you know, how to best utilize the technology. But I do think it's important to have these tools in the market. So to the extent that there's demand, as I said, and we do see a lot of demand for this, both from institutions and from retail traders. And so, of course, we're going to regulate that. And so to the extent that, you know, firms are exploring the frontier of these new products, I say do it here in the United States, first of all. Please don't go to offshore to do it. But come work with us as an agency to the extent you want to launch new products or new platforms. We're here to make that happen because we believe in, first of all, the individual that's going to go explore these new technologies and products and wants to invest in them. But we also believe that regulation and entrepreneurship and innovation go hand in hand. So we're here to work together with everybody that's interested in new products and platforms.

Frank W. Backes, CEO

And to the extent to which there are folks out there who want to meet with financial advisors, there are some investment bankers in the room. Okay. I wanted to talk about some of the new developments and get your sense as to whether these are just helping sort of the fast traders, the smart money, you know, the ones who really have the technology, or whether or not this actually makes sense beyond just high-frequency traders and the like. And I sort of wanted to start with... 24-7 trading and sort of, you know, what is the view from the administration as to whether 24-7 trading, which puts a burden, obviously, on clearance. On clearing, puts a burden on a variety of systemic risk issues. But still, we wanted to, I understand this, still want to be encouragement with respect to execution, right, and not having a weekend go by with people not being able to express a view or take risk on or risk off. But is it your sense that this is, this goes well beyond just the most sophisticated traders and this will have application and will matter to most Americans, whether through their pension fund, you know, traders or otherwise?

Michael Selig, Chairman

Well, 24-7 trading is a very complex issue. We could also spend an afternoon talking about that. That's exactly why I said since day one, we're not going to take a one-size-fits-all approach to 24-7 trading. We're going to look at it product by product, platform by platform. And for a blockchain-based market, 24-7 might make a lot of sense because you can move tokenized assets and stable coins very quickly, 24-7, 365. For other types of platforms, it may not make sense. And for certain asset classes, such as agriculture and energy, you know, it really can place a serious burden on our commercial end users. And so we need to take that into account, because ultimately, if we're not delivering market structure for our farmers, ranchers, producers, energy firms that utilize these markets for risk management, then these markets really aren't accomplishing their intended function. So I've been very clear since day one that we're going to look at this product by product and platform by platform. Now for prediction markets in areas related to, you know, Sports and elections and geopolitics and indicators and that sort of thing. We've allowed for 24-7 trading pretty much since day one. That's before my time approving some of these platforms. But when it comes to agricultural, for example, prediction markets or energy-related prediction markets, we've required those or worked with the exchanges to request that they list those on a 24, you know, by whatever it is. I think it's like a five. Day-a-week sort of situation, the same hours that you would get with the CME or ICE in the traditional futures markets. So it's an issue that we're focused on. We're going to be having a roundtable in about a month or two on this exact topic. But it's one that I don't want to rush. And the SEC is taking a very similarly thoughtful approach in evaluating this in equity markets. But we do have now perpetual futures contracts trading on crypto and in equities and other products that are 24-7, and we expect to see more of that. We're just not going to see it in every product.

Frank W. Backes, CEO

You have been bold in putting out advance notice of proposed rulemaking and sort of other initiatives to make sure that you are filling the gap that was left by the failure of Congress to pass the Clarity Act with respect to crypto. You've put out ways of interpreting what is futurity, what are leveraged spot contracts, and other things. You will come under intense criticism, I assume, once the new Congress takes over as to whether or not those are, you know, whether those will work or not, whether that will hold up to scrutiny. There will be some who will say what you're trying to do and what the industry is trying to do is to get as much volume as possible over the next two years. This is sort of what people call the Uber strategy or the Airbnb strategy. You make it so successful that it will be basically impossible to stop it in a couple of years. What would you say if Congress were to press you on that? Well, when they press you on that, what should we expect?

Michael Selig, Chairman

Well, I'd say who's paying for their fundraisers because, you know, I think a lot of the incumbents fear the future. And since day one, we've said we're not going to be in the pocket of the new entrants or the incumbents or anybody else. We're going to do what's right for the American people. And the American people want less trading fees. They want things like perpetuals where they don't have to roll their contracts. They want crypto, believe it or not. They want to be able to own their own assets and not be debanked when, you know, if we saw, you just have your January 6th, many of these firms got debanked. You know, it's really not something that should be controversial. We're just allowing for more products and services and innovations in the United States. We're allowing for people to take their own ownership of their assets. But sure, I imagine some of the incumbents might not like that. But we're not going to be bullied into pushing back against firms that are trying to do the right thing and come into the United States and build a business, and then they're being told because they have an incumbent competitor, they can't build here. They have to go to the Cayman Islands or China or someplace else. We're going to allow for companies to build here in the United States, and we're going to do it with the gold standard of regulation that protects investors. And that should be something that's not a partisan issue, but we'll continue to fight the special insurance.

Frank W. Backes, CEO

So, I was going to end and give you a chance to talk about AI, but I thought better of it having attended the Quantum Computing Roundtable, and I thought I'd give you the chance to end with a, whether it's a forecast or sort of your thoughts as to, with respect to the markets that you see. And this may be a few years out, how quantum computing will affect our lives.

Michael Selig, Chairman

Well, there's no question that quantum is going to affect our lives because all of our technologies, you know, whether it's our phone in our pocket or our, you know, bank accounts and everything else that we use on a day-to-day basis will be impacted by it. So it's going to impact us, of course, as end users. As an agency, what we're preparing for, of course, is making sure that all of our exchanges, as well as our intermediaries, our brokers, our advisors, are preparing for this new technology. And it's here. I think we're not too far off before this having a massive impact, both from a cybersecurity, but also from a defense standpoint on our day-to-day lives. And things as simple as our password managers, You know, we're going to have to make sure are shored up because, you know, we're seeing a lot of cyber risk, especially in crypto. And many of these blockchains are also going to have to adopt quantum resistant measures. So we're tracking all of that at the agency. We're working together with developers and firms on quantum resistance, as well as being able to take advantage of this. And, you know, one area that ties in with superintelligence, of course, are these data centers because, you know, you do need data centers to be able to run quantum computers. So, you know, this is another national security, economic security issue that I think is an important one that's going to be considered state by state as well as in the next Congress.

Frank W. Backes, CEO

So, before we end, I did want to say to everyone out there that not only is Chairman Seeley quite accessible, so are the folks that he's brought with him down to Miami, which would be Amir Syed, Alex, Titus, and... Michael Pasalaqua, who have been, who are great to talk to and are quite, I think you'll find this a different kind of CFTC. At least that's how I feel about it, and I'm sure you would say the same. Thank you very much for being so open and for being here.

Michael Selig, Chairman

Yep, thanks for having me.