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- Better Markets is challenging a CFTC plan to create rules for retail crypto trading because it lacks securities law protections.
- The CFTC issued an advance notice seeking public input on a framework for leveraged crypto transactions and a crypto asset market subcategory.
- Public comments will determine whether the agency proceeds with formal regulations after responses are submitted within 60 days.
Better Markets is challenging a Commodity Futures Trading Commission plan to create federal rules for leveraged and financed retail crypto trading, arguing that the derivatives regulator does not provide the investor protections available under securities law.
The criticism follows an Oct. 5 CFTC proposal seeking public input on a framework for certain retail crypto transactions and a proposed crypto asset market subcategory for designated contract markets offering them.
CFTC Targets Leveraged and Financed Retail Crypto Transactions
The proposal covers crypto transactions offered to retail customers on a margined, leveraged or financed basis under Section 2(c)(2)(D) of the Commodity Exchange Act. The agency is considering rules covering abusive trading practices, crypto-specific compliance requirements and market operations.
It is also examining a new designated contract market subcategory called a crypto asset market, or CAM, for platforms focused on these transactions. Existing designated contract markets could also offer the products under tailored requirements if the framework moves forward.
CFTC Chair Michael Selig said the agency is using authority already provided by the Commodity Exchange Act after Congress failed to enact a new federal crypto market structure law.
Better Markets Says SEC Protections are Stronger for Retail Users
Better Markets securities policy director Benjamin Schiffrin disputed the CFTC’s interpretation of its role. He argued that the agency was created mainly to regulate commodity derivatives markets historically dominated by institutional participants rather than retail investment markets.
The group says retail crypto customers would receive fewer protections under a CFTC-centered framework than investors trading securities overseen by the Securities and Exchange Commission.
Better Markets also disputes the CFTC’s argument that Congress intended the existing retail commodity transaction provision to become the basis for a wider crypto regulatory regime.
Public Comment Will Shape any Formal Rule Proposal
The Oct. 5 document is an advance notice of proposed rulemaking rather than a final rule. The CFTC will use responses to decide whether and how to proceed with formal regulations for leveraged and financed retail crypto transactions and crypto asset markets.
Comments are due within 60 days of publication in the Federal Register. The next stage will determine whether the agency moves forward with a formal rule proposal and how it addresses questions over legal authority and retail investor protections.
