CFTC Commits to Regulating Crypto Products that are not Securities

• To acquire authority, the U.S. regulator CFTC will collaborate with the most recent meeting of Congress.

During a conference on February 3, the U.S. Commodity Futures Trading Commission (CFTC) committed to regulating crypto tokens that are not classified as securities.

During the ABA Business Law Section Derivatives & Futures Law Committee Winter Meeting, CFTC chairman Rostin Behnam described the agency’s perspective.

Benham stated there is greater room for crypto regulation there. He said:

“There remains a gap in crypto cash market regulation for non-security tokens, and I believe the CFTC is well positioned to fill this specific gap if Congress so chooses.”

Benham stated that the CFTC will participate in the most recent congressional meeting for this purpose. Friday marked the beginning of the 118th Congress, which will remain for two years until February 3, 2025. It retains the Democratic majority in the Senate but introduces a Republican majority in the House — a feature that could affect the CFTC’s relations with politicians.

Benham cited a number of bankruptcies and failures in 2022 and stated that regulation is necessary to safeguard customers and limit failures.

Then, he described the CFTC’s initiatives in the cryptocurrency industry. Benham said that the CFTC’s compliance division has requested that crypto derivatives platforms demonstrate regulatory compliance. The CFTC conducts monthly meetings with registered platforms, he added. In addition, he stated that one section of the CFTC is evaluating whether specific platforms that trade crypto derivatives should impose trading limits on their workers.

Benham also highlighted particular CFTC cases from the previous year, such as the landmark case against OokiDAO and the proceedings against FTX and Alameda Research.

He added that the CFTC has brought 69 proceedings involving digital assets to date, and that 20% of the regulator’s 82 actions last year involved digital assets. Due to the CFTC’s “extremely restricted jurisdiction,” he deemed these outcomes “excellent.”

Currently, the CFTC plays a lesser role in crypto regulation than the Securities and Exchange Commission of the United States (SEC). The SEC dominates the space since numerous crypto ventures qualify as securities. The SEC frequently takes action against crypto exchanges, lending platforms, token sales and offerings, and fraud.

Last year’s events suggested that the CFTC could play a larger role in crypto regulation. Additionally, SEC chairman Gary Gensler supported expanding the CFTC’s position.