Better Markets, a nonprofit financial reform advocacy group, has criticized the Commodity Futures Trading Commission's move to develop rules for retail crypto transactions, arguing the agency lacks adequate investor protections.
The CFTC on Monday sought public comment on a potential framework for margined, leveraged, or financed retail crypto transactions under its existing authority. Benjamin Schiffrin, director of securities policy at Better Markets, stated that CFTC oversight is less suited than SEC oversight to protecting retail investors.
Key concerns raised by Better Markets:
- The CFTC lacks an investor protection mandate, unlike the SEC
- The CFTC's historical focus has been on commodity and derivatives markets dominated by large institutions
- CFTC rules provide fewer protections than those applied to securities regulated by the SEC
Schiffrin also challenged the legal basis for CFTC authority over retail crypto. He noted that the statutory authority cited by the CFTC was originally enacted to address fraud in leveraged precious-metals trading, arguing this does not demonstrate Congressional intent for the CFTC to become a primary regulator for retail crypto.
Better Markets further criticized the proposed framework for potentially allowing market participant affiliations that the group said contributed to FTX's collapse.
Regulatory landscape evolving:
The CFTC and SEC are advancing crypto policy under existing law after the CLARITY Act stalled in Congress. The CFTC's framework also considers a new federal category for crypto trading platforms to bring qualifying exchanges under CFTC oversight. The SEC has separately proposed easing custody rules for investment advisers, allowing limited tokenized US stock trading, and issued new guidance on how securities laws apply to crypto.
Industry representatives have pushed back on the criticism. Nate Geraci, president of NovaDius Wealth Management, argued that the crypto industry is seeking clear regulatory rules and that the CFTC and SEC may need to establish them if Congress does not.
