Better Markets argues CFTC is the wrong regulator for retail crypto market
Better Markets, a US nonprofit financial reform advocacy group, critiques the Commodity Futures Trading Commission's (CFTC) initiative to establish rules for certain retail crypto transactions. Better Markets argues that the CFTC lacks the mandate and suitable tools to safeguard retail crypto investors effectively and that this regulatory responsibility better fits the Securities and Exchange Commission (SEC).
CFTC's Proposal and Better Markets' Position
On Monday, the US Commodity Futures Trading Commission (CFTC) opened public consultation on a potential regulatory framework for margined, leveraged, or financed retail crypto transactions within its current authority. Benjamin Schiffrin, director of securities policy at Better Markets, emphasized that unlike the SEC, the CFTC lacks an investor protection mandate and traditionally regulates commodity and derivatives markets dominated by large institutions with minimal retail participation.
Schiffrin noted that CFTC’s rules do not provide the protections investors receive when trading securities under SEC oversight, therefore rendering the CFTC ill-suited to regulate retail crypto asset transactions.
Questioning Legislative Authority and Associated Risks
Better Markets challenges the CFTC’s assertion that Congress intended to expand the agency’s role to oversee these types of retail crypto transactions. Schiffrin pointed out that the statutory authority cited by the CFTC was originally enacted to address fraud in leveraged precious metals trading and does not imply Congress’s intent to appoint the CFTC as the primary regulator of retail crypto markets.
He also criticized the proposed framework for potentially permitting affiliations among market participants, which Better Markets highlighted as a contributing factor to the collapse of the FTX exchange.
Criticism of CFTC Chair’s Comments on US Crypto Leadership
Schiffrin took issue with CFTC Chair Mike Selig’s statements about making the United States the “crypto capital of the world,” noting the lack of explanation for why such a status would be beneficial. He drew an analogy that the US is not regarded negatively for not being the world’s cocaine production capital.
Schiffrin asserted that after 18 years of developments and numerous disproven claims, crypto assets still lack meaningful real-world use cases outside of pure speculation or criminal activity.
Alternative Views and Regulatory Developments
Nate Geraci, president of NovaDius Wealth Management, pushed back against Better Markets’ critique, stating the crypto industry simply seeks clear regulatory guidelines and that if Congress fails to deliver them, agencies like the CFTC and SEC may need to step in.
As part of ongoing regulatory efforts, the CFTC’s proposed framework includes creating a new federal category of crypto trading platforms to bring qualifying exchanges directly under CFTC supervision. Meanwhile, the SEC continues its crypto initiatives by proposing eased custody rules for investment advisers, allowing limited trading of tokenized US stocks, and issuing new guidance clarifying securities laws’ application to crypto assets.
Why it matters
This news highlights the ongoing regulatory tension between two primary US federal agencies—the CFTC and SEC—regarding the oversight of retail cryptocurrency transactions. Better Markets emphasizes that entrusting the CFTC with retail crypto regulation may weaken investor protections, as the agency has traditionally overseen institutional commodity and derivatives markets without an investor protection mandate. Conversely, the SEC, with its mandate for securities and investor protection, may be better equipped to regulate crypto assets often classified as securities. Their critique of the statutory and regulatory framework expresses concerns about potential repeat systemic failures akin to the FTX collapse. Better Markets’ stance challenges the CFTC’s current approach, illustrating the difficulties in establishing effective and fair regulation amid rapid innovation in the crypto sector.
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