‘The million-dollar question’: CFTC chair on regulating crypto alongside the SEC


Speaking at a Rutgers Law and Wall Street Blockchain Alliance event in Manhattan on Monday, Commodity Futures Trading Commission Chair Rostin Behnam sought to dispel the narrative of a turf war between his agency and the Securities and Exchange Commission.  

“It’s a pretty cynical view to suggest two agencies can’t figure it out and work together,” he said to an audience of lawyers and industry leaders. 

With crypto legislation stalled in Congress and unlikely to pass with elections looming, the regulators have sparred in a series of public talks and enforcement actions as to where authority lies. In particular, the question of which cryptocurrencies are commodities, and subject to CFTC oversight, as opposed to securities, and subject to SEC oversight, has created a perception of division between the two key agencies.

Behnam reiterated his belief that the two largest cryptocurrencies—Bitcoin and Ether—are commodities. SEC Chair Gary Gensler has raised questions over whether Ether should fall under SEC jurisdiction owing to its shift to a proof-of-stake consensus mechanism.  

“I’ve suggested [Ether] is a commodity, and Chair Gensler thinks otherwise,” Behnam said.  

However, he denied common industry sentiment that the CFTC would be the more favorable regulator. “Our enforcement record speaks for itself,” he said.  

He also said that the Digital Commodities Consumer Protection Act—legislation introduced by Senators Debbie Stabenow (D-Mich.) and John Boozman (R-Ark.) of the Senate Agriculture Committee that’s widely believed to be the crypto bill with the best chance of passing—would not give the CFTC full authority to categorize cryptocurrencies.  

Instead, he argued that the CFTC and SEC would continue to work together, pointing to the two agencies’ track record of collaboration, such as with the development and evolution of security futures. He said that the existing self-certification process, in which platforms come to the CFTC to register, should be sufficient for crypto participants, including when the question of commodity versus exchange is in doubt.  

“This is the million-dollar question,” he said. “How do we engage with the SEC when a product is in the gray area?”

The answer, he argued, would be the two agencies collaborating on the legal and policy questions to come up with a solution—an outcome that many in the industry find insufficient, especially considering none of the proposed bills creates clarity around categorizing crypto assets. 

Behnam said legislation is needed to create both a regulatory framework and to provide resources to the agency. The CFTC recently released its enforcement summary for fiscal year 2022, where more than 20% of its 82 actions were related to crypto. Among those—and the 62 crypto-related cases since 2014—he said every single one has been the result of a whistleblower, tip, or complaint, as opposed to traditional surveillance mechanisms. He attributed this to being “handcuffed” owing to the lack of tools the agency normally has in traditionally regulated markets.  

“The underlying fear and concern is we’re not doing enough,” he said. “If we had more resources, we could bring more fraud and manipulation to light.”

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