CFTC Chair Clashes with SEC’s Gensler, Argues Majority of Crypto Should Be Seen as Commodities

Yesterday at the Futures Industry Association Expo, Rostin Behnam, Chair of the U.S. Commodity Futures Trading Commission (CFTC), reiterated his call for a comprehensive regulatory structure for the crypto sector. 

Behnam’s comments come amid increasing regulatory scrutiny of the digital asset market. His statements diverge sharply from the views of Gary Gensler, Chair of the U.S. Securities and Exchange Commission (SEC), who argues that existing securities laws are adequate for the crypto industry.

A Divide in Regulatory Philosophy

In his recent remarks, Behnam highlighted the CFTC’s work in enforcement, stating that the commission secured orders amounting to over $6 billion in financial relief in the past fiscal year. He pointed out that 45 of these enforcement actions were related to misconduct in the digital asset market.

“These actions this fiscal year involved digital asset-related misconduct, accounting for over 34% of the 131 similar actions initiated by the Commission since 2015,” Behnam stated.

A crucial point of Behnam’s speech was his argument that around 70% of the crypto industry should fall under the category of commodities. This stance directly counters Gensler’s perspective that existing securities laws are well-equipped to govern the crypto market.

To enforce this categorization, Behnam urged Congress to create laws that would bolster the CFTC’s power to regulate commodity tokens through explicit rules.

Cybersecurity and Legal Victories

Behnam also touched upon the importance of proactive measures in maintaining robust cybersecurity, system security, and customer safety. He stressed that a reactive approach would compromise the Commission’s objectives.

In addition, the CFTC Chair highlighted a major legal win against Ooki DAO. The entity was shut down, and fines amounting to $643,542 were collected following a default judgment issued by the U.S. District Court for the Northern District of California in June 2023. This ruling classified Ooki DAO as a ‘person’ under the 1936 Commodity Exchange Act (CEA).

Behnam went on to discuss the limitations imposed by the outdated CEA, saying they pose real barriers to effective rulemaking. He also noted that financial markets are increasingly becoming vertically integrated, which changes the understanding of customer protections and raises new regulatory concerns.

In summary, Behnam emphasized the necessity for additional regulations specifically tailored for the crypto and decentralized finance (DeFi) sectors, a view that starkly contrasts with his SEC counterpart.

The contrasting opinions between the CFTC and SEC chairs on crypto regulation signify a divergence that could have a lasting impact on the industry. As both agencies vie for jurisdiction over this evolving market, it’s clear that a unified regulatory approach is still a distant reality.