CFTC Faces Criticism Over Retail Crypto Oversight Framework

The U.S. Commodity Futures Trading Commission (CFTC) is seeking public comment on a proposed framework for margined, leveraged, or financed retail crypto transactions, a move that has sparked criticism from the financial reform nonprofit Better Markets. The group argues that the CFTC is not the right regulator for these activities, as its oversight could result in weaker consumer protections compared to those under the Securities and Exchange Commission (SEC).

Better Markets' concerns come as both the CFTC and SEC advance crypto-related policies following the stagnation of the legislative “CLARITY Act” in Congress. With lawmakers failing to establish a new statutory structure, regulators are relying on existing authorities, an approach Better Markets claims is inadequate for protecting retail investors.

The nonprofit's director of securities policy, Benjamin Schiffrin, contended that the CFTC’s mission focuses on regulating commodity and derivatives markets, which historically have involved fewer retail participants than securities markets. Better Markets warns that the proposed framework could permit conflicts through affiliations among market participants, citing past industry failures like the collapse of FTX as evidence of such risks.

Industry leader Nate Geraci of NovaDius Wealth Management argued that the sector is pushing for clear rules, suggesting that regulators may need to act if Congress cannot provide legislative clarity. Meanwhile, the CFTC and SEC continue to move forward with their respective crypto policies, with the SEC also proposing changes to custody rules and guidance on securities laws applicable to crypto.