The Protocol: The CFTC Is Cracking Down on Crypto

DEXES DINGED! Last week, the Commodity Futures Trading Commission charged three decentralized finance (DeFi) platforms – Opyn, Inc., ZeroEx (0x), Inc. and Deridex, Inc. – with operating illegal derivatives trading services. Notably, the CFTC reprimanded the smart-contract based trading platforms for supporting tokens that were issued by third-parties. Just a week earlier, a New York court dismissed similar claims against Uniswap in a class action case, with a judge arguing that the decentralized exchange platform was not accountable for third-party “scam tokens” listed to its platform. The CFTC charges were significant in the context of the wider U.S. regulatory landscape. For several years now, the CFTC and Securities and Exchange Commission have been in a jurisdictional turf war over who should regulate the U.S. crypto industry. The industry has generally lobbied in favor of oversight by the CFTC, which holds a reputation as the less strict agency, but last week’s aggressive CFTC actions drew long-standing assumptions about the regulator into doubt. On the other hand, CFTC Commissioner Caroline Pham did pitch a relatively crypto-friendly, “time-limited” program last week to pave the way for regulated crypto markets and tokenization.