CFTC Commissioner to Pitch Retail Investor Definition to Get Set for Crypto

Commissioner Christy Goldsmith Romero says the agency needs a new way of categorizing investors as it prepares for new digital-assets oversight.

AccessTimeIconOct 14, 2022 at 9:15 p.m. UTC
Updated Oct 14, 2022 at 9:24 p.m. UTC

The Commodity Futures Trading Commission (CFTC) needs to redefine how it sets rules for retail investors now that the agency seems likely to take on oversight of spot crypto trading, said Commissioner Christy Goldsmith Romero.

She intends to propose a new retail investor definition, she said Friday in an interview with CoinDesk. Goldsmith Romero, who holds one of the Democratic seats on the five-member commission, said she’ll start with an informal concept posted on the agency’s website, asking for people to weigh in.

"We've got more retail investors coming into our markets that traditionally had been largely institutional," she said.

The current way the CFTC thinks of retail investors is “so wide,” she said, and “includes just regular people all the way up to somebody with $10 million.”

Adding a newly defined category could help the agency treat regular crypto users differently under the rules than the large institutions, and that would typically mean more limits and protections for the small-scale investors.

“You want to make sure that you can provide expanded access to retail investors but in a way that's safe and affordable for them, which might look very different than how the institutions or how a high net worth individual might purchase," Goldsmith Romero said.

The CFTC is so far looking most likely to be the primary regulator for crypto trading, according to various bills winding through Congress that would give it authority over the spot market – or the markets in which the actual tokens trade between investors. A consensus has begun developing among lawmakers from both parties to saddle the U.S. commodities agency with a new power to oversee spot markets for digital assets that aren’t securities, including bitcoin.

Goldsmith Romero, who is the lead commissioner for the agency’s technology advisory committee, suggested that a new retail definition could be employed if the agency is weighing rules – for instance – on the use of leverage by investors. Establishing a retail-investor category could set aside “household” investors from the pros, she said, and could give them “more consumer protections, maybe more disclosures, written in a way that regular people understand."

The CFTC’s sister agency, the Securities and Exchange Commission, has long maintained a shifting definition of what makes an “accredited investor” who isn’t thought to need as many protections as mom-and-pop investors. That threshold is currently at $1 million in net worth or $200,000 a year in individual income.

Goldsmith Romero said she’d like to hear from people with ideas or who don’t agree with her push.

"I'm happy to listen to all of that to try to get it right,” she said. “I'm just throwing out a concept of something that I think is not quite set up right. … Our definition of retail really doesn’t work for this asset class.”


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Jesse Hamilton

Jesse Hamilton is CoinDesk's deputy managing editor for global policy and regulation. He doesn't hold any crypto.