Better Markets has challenged the Commodity Futures Trading Commission’s attempt to build a federal framework for certain retail crypto transactions, arguing that the derivatives regulator is poorly suited to become the primary watchdog for individual crypto customers. The criticism followed the CFTC’s October 5 Advance Notice of Proposed Rulemaking, which begins a consultation on margined, leveraged and financed retail commodity transactions involving crypto assets. The agency has opened a rulemaking process, but it has not yet adopted or formally proposed a final regulatory framework.
Benjamin Schiffrin, Better Markets’ director of securities policy, said in the group’s official response that the CFTC is the “wrong agency” for the role. His central argument is that the CFTC’s traditional mandate focuses on commodity and derivatives markets rather than the investor-protection regime applied by the Securities and Exchange Commission. Better Markets contends that moving retail crypto activity toward CFTC oversight could give customers fewer protections than securities regulation provides.
Better Markets Questions the CFTC’s Legal Basis
The CFTC is relying on section 2(c)(2)(D) of the Commodity Exchange Act, which governs certain retail commodity transactions entered into on a leveraged, margined or financed basis. Its ANPRM asks how crypto-specific rules could prevent abusive practices, formalize industry compliance standards and potentially create a specialized crypto asset market category within designated contract market registration. The consultation is therefore narrower than an assertion that the CFTC already controls the entire U.S. retail spot crypto market.
Better Markets disputes the agency’s interpretation of congressional intent. Schiffrin noted that the statutory authority being invoked originally addressed fraud involving leveraged precious-metals transactions and argued that this history does not demonstrate that Congress intended the CFTC to become the principal regulator of retail crypto markets. That challenge goes to the scope of existing statutory authority rather than merely the details of how crypto firms should comply.
The group also criticized the CFTC for contemplating affiliations between different categories of market participants, arguing that vertically integrated structures can create conflicts similar to those exposed by the collapse of FTX. Chairman Michael Selig, by contrast, said the agency intends to develop rules capable of preventing fraud before it occurs. The disagreement is therefore partly structural: whether a derivatives-style framework can provide sufficient safeguards for markets with heavy retail participation.
Failed CLARITY Vote Leaves Agencies Filling the Gap
The regulatory push comes after Congress failed to advance comprehensive crypto market-structure legislation. On September 15, the Senate rejected cloture on the motion to proceed to the Digital Asset Market Clarity Act by 49-50, short of the 60 votes needed to open consideration. A motion to reconsider remains on the record, but no new vote has been scheduled. With the CLARITY Act stalled after the procedural vote, federal agencies are increasingly testing how far existing statutes can support crypto-specific rules.
That approach is already visible elsewhere. The SEC and CFTC have formalized greater coordination over digital-asset oversight, while the CFTC has aggressively defended its jurisdiction over event contracts. In April, the agency sued Wisconsin over state attempts to regulate prediction markets, arguing that federally regulated derivatives markets fall under exclusive federal jurisdiction. The common thread is an increasingly expansive effort by the CFTC to define the boundaries of its authority while Congress has yet to enact a comprehensive crypto statute.
The policy debate also extends beyond crypto exchanges themselves. Prediction markets are already drawing attention from major Wall Street firms, making questions of market structure, conflicts and federal preemption increasingly relevant to traditional finance. Better Markets argues that this expansion makes stronger retail safeguards more important, not less.
Neither side has won the jurisdictional argument. The CFTC has opened a 60-day comment process and says future rules will be shaped by the responses it receives, while Better Markets is contesting both the policy rationale and statutory foundation of the initiative. The immediate issue is not whether the CFTC has already become the primary U.S. crypto regulator, but whether it can use existing commodity law to move materially closer to that role without new legislation from Congress.
Liam Foster follows crypto markets from France, with a close eye on Bitcoin, Ethereum, Layer 1 assets, derivatives, sentiment and smart money flows. His coverage looks past the daily price move to understand what is happening underneath: liquidity, leverage, positioning and the behavior of larger players.
Liam’s style is calm, sharp and deliberately anti-crystal-ball. He does not frame every market move as a breakout or collapse. Instead, he focuses on what the data can actually support, where traders may be crowded and when a signal deserves attention without becoming a prediction.