CFTC Chairman Outlines Regulatory Loopholes for Digital Goods | Orrick, Herrington & Sutcliffe LLP

On July 10, CFTC Chairman Rostin Behnam testified before a U.S. Senate committee and urged Congress to pass legislation to create a federal regulatory framework for digital assets. Courts confirmed that digital asset commodities included Bitcoin and Ether. The Chairman expressed concerns about the lack of legislative responses that could protect consumers from digital asset fraud. Behnam also highlighted a report by the Financial Stability Oversight Council that identified a gap in the regulation of commodity tokens. In conclusion, the Chairman emphasized that Congress should act quickly to empower commodity regulators to provide the necessary consumer protections.

Benham noted that the CFTC had been actively enforcing digital goods regulations, filing more than 135 cases. However, the growing number of enforcement cases reflected the accelerating adoption of digital assets by U.S. investors. The Chairman emphasized that the CFTC, primarily responsible for overseeing derivatives markets, was devoting significant resources to a market it lacked the authority to robustly regulate. The Chairman also noted the progress made by other countries in establishing regulatory frameworks for digital assets. He warned that regulatory gaps left U.S. consumers vulnerable to exploitation by bad actors and made coordination efforts difficult. The Chairman finalized his legislative priorities for a comprehensive regulatory framework, including a principles-based supervisory model, adequate funding, disclosure requirements, anti-money laundering measures, and a clear distinction between commodities and securities. A link to the recorded testimony can be found here.