CFTC's Davis: Memecoins Likely Fall Under CFTC Jurisdiction

The regulatory landscape for memecoins, a type of cryptocurrency often inspired by internet memes or trends, has been a contentious issue in recent months. As investors have experienced losses from memecoin investments and called for regulatory clarity, a former chief attorney at the Commodity Futures Trading Commission (CFTC) has weighed in on the debate.

Elizabeth Davis, a partner at the law firm Davis Wright Tremaine and a former CFTC chief trial attorney, believes that the CFTC is well-positioned to regulate memecoins. She argues that the CFTC's focus on protecting market participants from fraud and manipulation makes it the right authority to oversee the controversial sector. Davis told Cointelegraph that the CFTC's broad interpretation of a commodity under the Commodity Exchange Act would likely extend to memecoins, which would fall under their jurisdiction.

The chances of the CFTC regulating memecoins will depend on how the broader regulatory framework for digital assets plays out, according to Davis. If the CFTC gains jurisdiction over spot crypto, as current trends suggest, then the chances of memecoins being included in that regulation are pretty good. Davis also expressed confidence that US regulators would likely clarify the regulatory status of memecoins within the coming year.

Davis highlighted the ongoing disagreement between the SEC and the CFTC over which agency should regulate the memecoin market. She argues that this disagreement demonstrates the problems and confusion that arise from the lack of a clear regulatory framework for digital assets. The CFTC has taken an expansive view of its jurisdictional mandate over digital assets, including memecoins, to prevent fraud or manipulation in connection with these products.

As regulators continue to debate the appropriate authority for memecoin regulation, investors have expressed outrage over the lack of legal clarity around these cryptocurrencies. While regulators have yet to provide clear guidance, some industry figures have criticized investors for taking a careless approach to memecoin investments. Zak Folkman, co-founder of the Trump family's crypto venture, World Liberty Financial, recently criticized investors for risking their entire life savings on memecoins.

Meanwhile, the US Department of Justice has launched an investigation into the Libra token, a memecoin endorsed by Argentine President Javier Milei. The investigation comes amid reports of investors recording losses from memecoin investments and calls for regulators to take the situation under control.