CFTC’s Retail Crypto Plan Draws Criticism Over Investor Protections

The U.S. Commodity Futures Trading Commission (CFTC) is seeking public comments on a proposed framework for retail crypto transactions involving margin, leverage, or financing. This move has sparked criticism from Better Markets, a financial reform nonprofit, which argues that the CFTC is not the right regulator for retail crypto activities. The group contends that the CFTC’s framework could leave consumers with weaker protections compared to those under the Securities and Exchange Commission (SEC).

Better Markets claims that the CFTC’s mandate is primarily focused on commodity and derivatives markets, which historically have had fewer retail participants than securities markets. Benjamin Schiffrin, the nonprofit’s director of securities policy, argued that the CFTC’s rules lack the safeguards typically provided to securities investors. This could result in less protective rules for retail crypto transactions than those governing traditional investor-facing markets.

The group also disputes the CFTC’s interpretation of Congress’s intent behind the statutory authority it is using for the proposed framework. Better Markets argues that the authority was originally meant to address fraud in leveraged precious-metals trading, not to regulate retail crypto transactions. Additionally, the nonprofit criticized aspects of the framework that could allow affiliations between market participants, a concern linked to past industry failures like the collapse of FTX.

Nate Geraci, president of NovaDius Wealth Management, pushed back against Better Markets’ critique, arguing that the crypto industry is seeking clear rules rather than speculative outcomes. Geraci noted that if Congress cannot provide regulatory clarity, the CFTC and SEC may need to step in to establish workable boundaries. Meanwhile, the SEC is also advancing crypto-related measures, including easing custody rules for investment advisers offering crypto and issuing new guidance on securities laws.