CFTC Abandons Regulation by Enforcement, Shifts Focus to Crypto Firms

The acting chair of the U.S. Commodity Futures Trading Commission (CFTC), Caroline Pham, has announced that the agency is ending its practice of regulation by enforcement. This shift in approach is likely to impact the CFTC's handling of crypto firms, following the departure of former chair Rostin Behnam.

In a Feb. 4 notice, Pham stated that the CFTC was restructuring the priorities for its Division of Enforcement. The commission will divide its responsibilities into two task forces, focusing on retail fraud and violations of the Commodity Exchange Act, as well as complex fraud and manipulation. This realignment aims to enhance the CFTC's enforcement program by empowering staff to focus on matters that secure justice for victims and uphold public confidence in the integrity of markets.

The CFTC's enforcement actions in recent months have included cases against defunct crypto exchange FTX, Binance and its CEO Changpeng Zhao, former Voyager CEO Stephen Ehrlich, and former Celsius CEO Alex Mashinsky. In fiscal year 2024, the CFTC reported more than $17 billion in monetary relief, primarily from these actions.

Meanwhile, another major U.S. financial regulator, the Securities and Exchange Commission (SEC), has announced the formation of a crypto task force to develop a framework for digital assets. The SEC is currently led by acting chair Mark Uyeda, pending the U.S. Senate's decision on Trump's nominee, Paul Atkins, to replace former Chair Gary Gensler.

The CFTC, under Pham's leadership, has also announced plans to hold public roundtable discussions on market issues, potentially including digital assets. Additionally, the commission is reportedly investigating Super Bowl bets offered by Crypto.com and betting platform Kalshi.