Better Markets, a nonprofit financial reform advocacy organization, has criticized the US Commodity Futures Trading Commission’s approach to regulating retail crypto transactions, warning that the move could provide weaker protections for individual investors.
CFTC seeks input on crypto trading rules
The CFTC publicly asked for comments on Monday regarding a proposed regulatory framework for retail crypto transactions that involve margin, leverage, or financing. The effort would utilize the agency’s current authority to establish oversight mechanisms for such trades, which are increasingly popular among everyday investors.
Benjamin Schiffrin, Better Markets’ director of securities policy, questioned the suitability of the CFTC for this role. He argued that the CFTC’s historical mandate focuses on commodity and derivatives markets, which have traditionally involved large institutional participants rather than retail investors.
Unlike the SEC, the CFTC lacks an investor protection mandate. Its mission is to regulate the commodity and derivatives markets, which historically have been dominated by large institutions with very little retail investor participation.
Schiffrin further stated that investors trading crypto assets under CFTC rules would not benefit from the same standards and safeguards present in markets overseen by the Securities and Exchange Commission.
Debate over regulatory authority
Better Markets raised additional concerns about whether Congress ever intended for the CFTC to have primary oversight over retail crypto. Schiffrin pointed out that the statutory authority the CFTC references was originally enacted to stop fraud in leveraged precious metals trades, suggesting it was never meant for regulating retail cryptocurrency transactions.
He also criticized possible loopholes in the CFTC’s proposed framework, claiming these could allow affiliations between market participants that contributed to the high-profile collapse of crypto exchange FTX.
Mini dictionary: Better Markets—A nonprofit organization focused on promoting robust financial reform and market integrity in the US. The group regularly comments on regulatory policies, especially concerning investor protection and the financial system’s stability.
Amid this debate, Congress has stalled on enacting new crypto legislation. The CFTC and SEC are both moving ahead under their existing legal powers, signaling their willingness to regulate the sector even without further action from lawmakers.
Industry and agency responses
Schiffrin criticized recent remarks from CFTC Chair Mike Selig about plans to make the US a global crypto hub, questioning the benefit of such a goal. He highlighted concerns that, after years of development, crypto has yet to demonstrate a substantial real-world application outside of speculation or illicit activities.
Crypto—after 18 years of effort and innumerable disproved and baseless claims—still lacks any real-world use case. It is used either purely for speculation or for criminal purposes.
Nate Geraci, president of NovaDius Wealth Management, countered these views. He described the crypto sector as seeking clear regulatory guidelines and suggested that if Congress is unable to provide such rules, the CFTC and SEC may need to step in to fill the gap.
Mini dictionary: NovaDius Wealth Management—A US-based financial advisory firm focused on wealth management services, with Nate Geraci as president. The company also provides commentary on regulatory and market developments.
The CFTC’s proposed framework also discusses the potential creation of a new federal category for crypto trading platforms. This change would enable certain qualifying exchanges to operate directly under the CFTC’s supervision.
SEC actions in parallel
Meanwhile, the SEC has advanced several measures covering digital assets. On Thursday, the SEC announced proposals to relax some custody requirements for investment advisers, permitted limited tokenized US stock trading, and published updated guidance on the application of securities law to crypto.
