CFTC Chair Laments Absence of Authority to Avert FTX-Like Collapse in Crypto Markets

The Commodity Futures Trading Commission (CFTC) chair Rostin Behnam decried the Congress’s delay to empower the agency with supervisory power over digital assets markets. The CFTC chief indicated on Wednesday, November 15, that the regulator is still waiting for Congress to grant more authority to avert a repeat of a major crypto collapse in 2022.

CFTC Chair Warns US Unpreparedness to Avert FTX-Type Collapse

Behnam admitted that nothing changed following the FTX implosion as the US regulators still lack the authority to repulse another major crypto meltdown. In his address at the Financial Markets Quality Conference 2023 hosted at Georgetown University, Behnam warned that the US could experience a similar position as the FTX-type event that took down the crypto industry with it.

Behnam admitted that while nothing changed regarding empowering CFTC, he acknowledged that the crypto investing enthusiasm is calm, unlike the months before the sudden FTX implosion in November 2022. The chair indicated that the crypto market environment contrasts with the experiences a year ago.

Behnam’s address at the Financial Markets Quality Conference 2023 echoed the routine criticism that CFTC suffers from limited supervisory powers over the crypto markets where various digital assets such as bitcoin and Ethereum trade. The chair indicated that the CFTC can only intervene in the spot market when manipulation and fraudulent activities arise.

Behnam emphasized that the CFTC officials lack the reach in the crypto derivatives sector, allowing them to assess the firms’ registrations and authority to supervise their behaviors directly. He added that the Securities and Exchange Commission (SEC) similarly suffers limited scope as only police the securities market.

Behnam delved into the assertion by SEC chair Gary Gensler, who routinely indicated the bulk of crypto tokens constitute securities. The CFTC chair observed that the SEC’s chief has repeatedly admitted that some cryptocurrencies, such as bitcoin, fall beyond the SEC’s jurisdiction. He categorized ether alongside Bitcoin, observing in his Wednesday address that the non-security crypto tokens constitute over 50% of the marketplace.

CFTC Supports Pursuit of Legislation to Avert FTX-Like Implosion

Behnam observed that US lawmakers have repeatedly pursued various legislative bills to grant CFTC jurisdiction over cash markets directly. He lamented that the crypto market structure bills are awaiting action within the preliminary stages.

Behnam reflected on one bill recently approved by House of Representatives committees. Nonetheless, such still needs the entire chamber’s vote, leaving the Republican-led effort lacking necessary support within the Democrat-controlled Senate.

Behnam pointed out that the US Congress is dominated by multiple bills that are unfortunately caught in a holding pattern. He echoed pronouncements by crypto lobbyists who anticipated that digital bills, including one aimed at establishing guardrails for the stablecoin issuers, would secure the House floor vote before 2024. 

The CFTC chair illustrated that Congress is recently occupied with sustaining the federal government open as members prioritize spending bills. He added that the House suffered sidetracking following Republicans’ decision to oust Representative Kevin McCarthy and replacement with Representative Mike Johnson as House Speaker.

CFTC Asserts Role in Policing Prediction Markets as Election Cop

The CFTC chair offered a snippet of the ongoing court battles involving prediction market Kalshi regarding political-outcomes betting. He reaffirmed the CFTC’s opposition to Kalshi’s election contracts, resulting in the lawsuit pending the court’s decision. The primary question involves ascertaining if societal value warrants hedging political risk and the capability to enter pay-oriented contracts on party and candidate elections.

Behnam indicated that the CFTC would not hesitate to become an election cop in the event of alleged fraud and manipulation at the state and local district levels. He argued that the CFTC can not absorb itself from becoming an election cop, mainly when alleged fraud in an election featuring unlisted derivatives and listed futures exists. 

Behnam added that the fraud would influence the price revaluation of the listed future. He expressed his opposition to the CFTC to assume such a role in the United States elections.

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