CFTC Commissioner Stump Decries 'Oversimplification' That Crypto Is Either a Security or Commodity

The U.S.' top commodities regulator primarily oversees derivatives markets, rather than spot commodity markets, Dawn Stump, a commissioner at the Commodity Futures Trading Commission's (CFTC), said Monday.

Stump, who was appointed by then-President Donald Trump in 2018, joined a growing group of regulators debating which federal agency should regulate the booming digital asset market in the United States. 

In her statement, Stump described a “grossly inaccurate oversimplification” that digital assets are either securities or commodities that fall under the jurisdiction of the CFTC. If they are deemed to be securities, they would be regulated by the U.S. Securities and Exchange Commission.

Because the CFTC doesn’t regulate commodities themselves – only futures contracts or derivative products like swaps – Stump said it doesn’t matter whether digital assets are classified as securities or commodities, because they wouldn’t fall under the authority of the CFTC unless a futures or derivatives contract was involved. 

Earlier this month, SEC Chairman Gary Gensler said that his agency should regulate a broader segment of the crypto market, including possibly spot market and exchanges that list any cryptocurrencies that fall under securities law. In response, crypto-friendly CFTC Commissioner Brian Quintenz tweeted that the SEC has no authority over “pure commodities or their trading venues” – implying that responsibility belongs to the CFTC.

In her statement Monday, Stump also explained the difference between the CFTC’s regulatory authority, which Stump said doesn’t apply to digital assets, and its broader enforcement authority, which Stump suggested does. Using the CFTC’s case against crypto exchange and derivatives trading platform BitMEX as an example, Stump said the agency has historically used its anti-manipulation and anti-fraud enforcement authority to protect cash commodities.

“Because well-functioning futures contracts (and other derivatives products) rely upon a sound underlying cash market and may reference cash market indexes in their pricing. Thus, the CFTC utilizes this particular enforcement authority to protect the integrity of the derivatives markets that it regulates,” Stump wrote.