The U.S. Commodity Futures Trading Commission (CFTC) has rescinded a long-standing policy forbidding defendants in settlements from publicly denying the agency’s allegations. The agency announced on Wednesday that it has revoked this practice, which had been in effect since 1998.
Reasons behind the policy shift
The CFTC indicated that the previous rule may have created an inaccurate perception that the Commission was attempting to avoid criticism. In its statement, the agency said that the revision would give it greater flexibility in enforcement settlements moving forward.
CFTC Chair Mike Selig explained that for nearly thirty years, the Commission required settlement defendants to agree not to publicly dispute the agency’s claims. According to Selig, ending this practice brings the CFTC’s approach in line with other federal regulators.
Mike Selig clarified that the Commission has long asked defendants to waive their right to publicly deny allegations in order to reach a settlement, but that this requirement has now been dropped with the latest decision.
Mini glossary: The CFTC is the U.S. federal agency overseeing the derivatives and futures markets, including some crypto-related derivatives and cases of market abuse within its jurisdiction.
Pushback from crypto companies
Several crypto firms facing actions from the CFTC or the Securities and Exchange Commission (SEC) have long criticized this settlement requirement. They argued that the policy amounted to an infringement on free speech.
The CFTC also noted it does not intend to enforce existing non-denial provisions in current settlements. Still, the agency clarified that it may require parties in particular cases to admit to certain facts or legal responsibilities as part of any agreement.
A broader regulatory pullback
Under Donald Trump, both the CFTC and SEC started reversing some enforcement initiatives against crypto companies begun during Joe Biden’s presidency. This latest move is seen as part of a broader re-evaluation of regulatory strategy in Washington.
In this context, the CFTC on Thursday requested that its $5 million settlement with cryptocurrency exchange Gemini be annulled. Chair Selig alleged that the case was targeted due to political motivations.
While seeking to void the $5 million Gemini settlement, the CFTC faced internal suggestions that this particular case was given undue prominence for political reasons.
Former chairman’s reaction
Tim Massad, who led the CFTC under President Barack Obama, described the reversal of such a major settlement as highly unusual. In comments given Friday, Massad emphasized that such a step was out of the ordinary for the agency.
With this latest decision, the CFTC is widely expected to adopt a more flexible approach to settlements. However, which cases will require additional admissions, and how this change will impact ongoing matters in the crypto industry, remain to be seen in the coming months.
