CFTC Authority Key for Crypto Regulation, Ex-Chair Warns

Rostin Behnam, the former chair of the U.S. Commodity Futures Trading Commission (CFTC), reiterated on May 28 that the digital asset market will remain under-regulated unless Congress grants the CFTC expanded authority over spot “cash” markets in cryptocurrencies. In a Bloomberg TV interview, Behnam argued that Bitcoin (BTC), Ether (ETH) and several large-cap tokens clearly meet the Commodity Exchange Act (CEA) definition of a commodity, yet fall outside the Securities and Exchange Commissionʼs (SEC) jurisdiction.

“If you look at existing law, the few largest tokens are commodities, which means the SEC does not have jurisdiction over those tokens, which include Bitcoin and Ether,”
– Rostin Behnam

Under current federal statutes, the SEC can only regulate securities, while the CFTC’s mandate is strictly limited to derivatives products. As a result, unleveraged spot markets for crypto assets remain largely unregulated, exposing retail and institutional investors to fraud, market manipulation and operational risk.

CFTC vs. SEC: Regulatory Remit and Limitations

Section 1a(9) of the CEA defines “commodity” to include digital tokens, yet the CFTC’s authority extends primarily to futures, swaps and other derivatives cleared or traded on designated contract markets (DCMs) and swap execution facilities (SEFs). Meanwhile, the SEC enforces the Securities Act of 1933 and Securities Exchange Act of 1934, which do not cover non-security tokens.

• CFTC jurisdiction: Derivatives on commodities, oversight of clearinghouses (DCOs), futures commission merchants (FCMs) and swap dealers.
• SEC jurisdiction: Registration requirements for securities issuers, broker-dealers, exchanges and Automated Trading Systems (ATS).
• Gap: Spot marketplaces for non-security tokens lack a clear supervisory framework for Anti-Money Laundering (AML), know-your-customer (KYC) and market integrity standards.

Legal experts such as Professor Hilary J. Allen at Georgetown University note that without statutory amendments, spot trading platforms operate in a legal gray zone. “The CFTC’s authority is well defined for derivatives, but the moment you step into pure cash markets for digital assets, you need explicit congressional direction,” Allen says.

Proposed Legislative Reforms to Empower the CFTC

On the legislative front, several bills have been introduced to plug the oversight gap. Notably, the Digital Commodities Consumer Protection Act (DCCPA), recently advanced by the Senate Agriculture Committee, would amend the CEA to grant the CFTC direct authority over retail spot trading venues for all digital commodities.

1. Registration: Require spot exchanges to register as DCMs or SEFs, subject to CFTC rulebook and supervision.
2. Market-maker obligations: Mandate minimum liquidity and pre-trade transparency in order books.
3. Clearing and settlement: Enforce timely settlement finality and segregation of customer funds.

In recent weeks, the bill cleared a key markup with bipartisan support, reflecting growing recognition on Capitol Hill that a dual-regulator model requires clearer mandates.

Global Crypto Regulatory Comparisons

While U.S. lawmakers debate CFTC expansion, other jurisdictions are forging ahead with unified frameworks:

• European Union: The Markets in Crypto-Assets (MiCA) regulation sets comprehensive rules for issuance, trading and custody of tokens, including stablecoins, across all member states.
• United Kingdom: The Financial Conduct Authority (FCA) requires centralized exchanges to meet capital, governance and AML standards; stablecoins pegged to fiat now qualify as Electronic Money tokens.
• Japan: The Financial Services Agency (FSA) licenses crypto exchanges under the Payment Services Act, with strict cybersecurity and reserve asset requirements.

These frameworks underscore that cohesive, technology-agnostic statutes can foster innovation while safeguarding market participants.

Market Infrastructure and Risk Management Considerations

Beyond regulatory authority, experts stress the importance of robust infrastructure and risk controls. Key technical specifications include:

• Distributed ledger resilience: Stress-testing node networks for up to 95% node outages to ensure consensus continuity.
• Smart-contract audits: Third-party code reviews certified by recognized standards bodies (e.g., IEEE P2418.3).
• Custodial segregation: Multi-party computation (MPC) wallets and cold-storage protocols compliant with ISO/IEC 27001.

“Regulations must keep pace with the rapid evolution of DeFi primitives and algorithmic market-making strategies to effectively mitigate systemic risk,” notes fintech consultant Dr. Priya Narang.

Broader Political Context and Institutional Integrity

Behnam’s comments come amid heightened scrutiny of political figures’ involvement in crypto. On May 28, MSNBC political strategist Sanders Townsend suggested that the Trump family’s crypto investments, including memecoins and stablecoins issued by World Liberty Financial, could present conflicts of interest if the executive branch shapes rule-making.

“Until we do something, the [crypto] market will remain unregulated. Customers, investors, retail and institutional, will be more vulnerable to harm, fraud, manipulation and conflicts of interest, until the market is regulated.”
– Rostin Behnam

Regulation as a Pillar of Financial Market Health

During the same interview, Behnam countered remarks made by Vice President JD Vance at the Bitcoin 2025 conference, who had proclaimed that “we reject regulators” while claiming crypto “has a champion” in the White House. “Regulators are extremely important,” Behnam said. “They’re the reason American markets are the most desired in the world.” He stressed that clear rules, enforcement and consumer protections underpin market confidence, liquidity and cross-border capital flows.

Conclusion

As digital assets mature and institutional participation deepens, the call for statutory clarity grows louder. Empowering the CFTC to oversee spot crypto markets could align U.S. policy with global peers, strengthen infrastructure resilience and protect investors. With key legislation moving through Congress, stakeholders are closely watching whether lawmakers will grant the CFTC the explicit authority needed to bridge today’s regulatory gap.