On Wall Street, the Industry Writes Its Own Rulebook

On Wall Street, industry groups write and police their own rules under federal oversight but not control. The government does not write the tests.

In finance, groups like FINRA, which oversees brokers, and the National Futures Association, which oversees futures trading, let firms set their own rules and check one another.

The reason is self-interest. The firms trade risk with each other every day, so one firm's failure can hurt the rest. They want protection, but they also want markets to stay fast and efficient, not slowed down by outsiders.

Congress still has a role, but it is oversight, not control. FINRA and the futures group ultimately report to committees in the Senate and House, which are supposed to make sure the industry bodies are doing their jobs.

The testing would be done by industry experts. The industry groups decide how checks are run, who runs them, and which independent experts are brought in, and they can change those people and methods over time.

David Sacks, who was involved in federal AI policy work at the time, argues that ability to keep changing the tests is the point. Because the people running the checks build software, he says, they can move faster than a new federal agency could.

As an example, Sacks pointed to California's AI bill from about eighteen months earlier. He said none of California's rules made sense even at the time, and a year later none of those requirements matched the technology.

Sacks said he could support the same model for AI, speaking only for himself. Sacks said a new government agency “would rapidly become a DMV for AI.” He said “The government does not have the expertise to evaluate AI models” and “The criteria are changing too rapidly.”

In the AI version, industry experts would assess new systems for cyber risk, biological risk, weapons risk, and social manipulation, with federal oversight but not control.