Better Markets Challenges CFTC’s Role in Retail Crypto Regulation

The US Commodity Futures Trading Commission (CFTC) has launched a public comment process on a proposed regulatory framework for certain retail crypto transactions involving margin, leverage, or financing. This move has sparked criticism from Better Markets, which argues that the CFTC is not the right regulator to protect everyday investors in crypto.

Better Markets contends that the CFTC lacks an explicit investor-protection mandate comparable to the Securities and Exchange Commission’s (SEC) securities-focused authority. The nonprofit financial reform advocacy group claims that the CFTC’s historical focus on commodity and derivatives markets, dominated by large institutions, makes it unsuitable for overseeing crypto transactions marketed to retail customers.

The CFTC’s proposal also includes plans for a new federal category for qualifying crypto trading platforms, which would bring eligible exchanges under CFTC oversight. Better Markets challenges the legal rationale behind the CFTC’s authority, arguing that the statutory authority the agency is relying on was originally enacted to address fraud in leveraged precious-metals trading, not for regulating retail crypto activity.

In response, industry participants like Nate Geraci, president of NovaDius Wealth Management, argue that the crypto industry is primarily seeking clearer “rules of the road.” As Congress stalls on the CLARITY Act, regulators like the CFTC and SEC are moving forward with their own approaches to fill the gap.