Recent turbulence in the cryptocurrency industry has enlivened an ongoing debate about which agency should be the lead federal regulator of crypto going forward: the Commodity Futures Trading Commission or the Securities and Exchange Commission. The answer: Both agencies should continue to exercise their regulatory authority over crypto assets and activities provided by existing law, and any new legislation should grant exclusive authority to the CFTC regarding spot market crypto assets—those that are traded for immediate delivery. Unfortunately, today US crypto regulation involves many regulators including the CFTC and SEC, as well as the Financial Crimes Network of the Department of the Treasury and many states. It is likely that this complex web, as well as gaps in the web, contributed not only to the recent collapse of FTX, but of many other crypto players, too, including Celsius, BlockFi, and Voyager. US regulation of traditional securities—such as equities and debt instruments, as well as investment contracts—is under the oversight of the SEC. The CFTC, on the other hand, has plenary jurisdiction over derivatives—such as futures or swaps—involving commodities, except to the extent such commodities constitute securities. The CFTC also has the authority to bring enforcement actions against persons who commit fraud in connection with commodity transactions even when they don’t involve derivatives.
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