In a recent announcement, Acting Chair Caroline Pham confirmed that the CFTC will align itself with other federal regulators by focusing primarily on fraud and limiting the use of novel legal theories in enforcement, particularly in the digital asset space.
Commissioner Pham doubled down on her commitment to ending the practice of "regulation through enforcement." In praising the Justice Department's recently issued policy on digital assets enforcement priorities and digital assets charging considerations set forth in the Deputy Attorney General's memorandum, Ending Regulation by Prosecution, dated April 7, 2025,1 Commissioner Pham directed CFTC staff to not seek to "charge regulatory violations in cases involving digital assets."2
Well before becoming Chair, Pham had railed against what she deemed the inequity of enforcement actions against market participants where regulations were confusing or unclear. Upon the announcement of the new Justice Department memo, Pham welcomed an end to the "lawfare from multiple federal agencies against innovators in the digital asset space [that] has created unfairness and uncertainty that has undermined trust in the regulatory process and impeded American competitiveness."3
Under Executive Order 14219, Pham has directed the CFTC staff and the Director of Enforcement, with respect to ongoing CFTC litigation matters in federal court to "preserve the CFTC's limited enforcement resources by deprioritizing actions involving violations of registration requirements under the CEA unless there is evidence that the defendant knew of the licensing or registration requirement at issue and violated such a requirement willingly."4 Pham has also directed the CFTC staff to not take any litigating positions or arguments that are contrary to the President's executive orders, Administration policy or DOJ policy on digital assets enforcement priorities and charging considerations.
This recent directive continues the CFTC's evolution under Pham from an aggressive prosecutorial agency to a more restrained approach focusing on simplifying and clarifying rules and standards. At Pham's direction the CFTC recently streamlined and realigned its tasks forces to refocus on fighting fraud claims.5 There has also been a renewed emphasis on incentivizing self-reporting, cooperation, and remediation. Pham also launched an initiative with an aim toward expeditiously resolving all ongoing CFTC matters that do not involve customer harm or market abuse.6 Thus far, nearly two dozen firms have reached out to the CFTC to participate in that initiative.7
There are several important takeaways from the current trend.
-First, as we have seen from the Administration's recent executive orders, cryptocurrencies and other digital assets are likely to experience some relief from agency scrutiny and enforcement. The CFTC has now been given a clear directive to refrain from pursuing regulatory violations against digital assets.
-Second, more generally, the CFTC is unlikely to pursue enforcement actions against market participants for simple regulatory violations (i.e., non-fraud, non-market manipulation). It remains to be seen whether such shift in priorities will trickle down to the other self-regulatory organizations.
-Third, to the extent that a business or individual is currently involved in a dispute with the CFTC over a non-fraud matter, this could be a very opportune time to reach out to the CFTC to resolve the matter favorably.
-And finally, if a business or individual is aware of (or becomes aware of) a regulatory violation, the current climate is becoming increasingly conducive to self-reporting. Whereas practitioners may have been wary of counseling their clients to self-report to the CFTC in the past—because the CFTC had frequently used those self-reports as a basis to pursue enforcement actions—early indications suggest that the current Administration will incentivize early reporting and cooperation.
Footnotes
1. Deputy Attorney General Memorandum on "Ending Regulation by Prosecution," April 7, 2025, available at chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.justice.gov/dag/media/1395781/dl?inline.
2. CFTC Release No. 9063-25, "Acting Chairman Pham Lauds DOJ Policy Ending Regulation by Prosecution of Digital Assets Industry and Directs CFTC Staff to Comply with Executive Orders," April 8, 2025, available at https://www.cftc.gov/PressRoom/PressReleases/9063-25.
3. Id.
4. Id.
5. Keynote Address by Acting Chair Caroline D. Pham, FIA BOCA50, March 11, 2025, available at https://www.cftc.gov/PressRoom/SpeechesTestimony/opapham13.
6. CFTC Release No. 9063-25, supra.
7. Id.
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