CFTC Crypto Market Plan Could Face Closer Judicial Scrutiny After Loper Bright

The Commodity Futures Trading Commission’s proposed crypto framework could face closer judicial scrutiny if it advances to final rules because courts must independently assess the agency’s statutory authority.

The CFTC published an Advanced Notice of Proposed Rulemaking on Oct. 5 covering retail commodity transactions involving crypto assets under Section 2(c)(2)(D) of the Commodity Exchange Act.

The proposal outlines two potential federal frameworks: Regulation Crypto Asset Transactions, known as Regulation CTX, and Regulation Crypto Asset Markets, or Regulation CAM. CAM would create a crypto-asset subcategory within designated contract market registration.

The proposal seeks comment on preventing abusive practices, providing crypto-specific compliance guidance and creating a uniform national framework. It is an initial proposal rather than a final rule. Comments will inform potential future rulemaking.

Written comments are due within 60 days after the notice is published in the Federal Register. A specific deadline date has not been set.

“The American people deserve clarity, certainty, and consumer protections in the crypto asset markets,” CFTC Chairman Michael S. Selig said Oct. 5.

The legal issue is whether the Commodity Exchange Act gives the CFTC enough authority to establish the proposed framework without additional legislation. The Supreme Court’s June 28, 2024, decision in Loper Bright Enterprises v. Raimondo overruled Chevron deference and held that courts must exercise independent judgment when interpreting statutes.

A court reviewing a final CFTC rule therefore would not be required to accept the agency’s interpretation solely because the statute is ambiguous. No final rules have been issued, and no court has ruled on the validity of Regulation CTX or Regulation CAM.

Selig has described federal registration as an option for crypto exchanges. “Only Congress has the authority to mandate that all crypto asset exchanges register with the Commission,” he said.

The Senate failed to invoke cloture on the motion to proceed to H.R. 3633, the Digital Asset Market Clarity Act, by a 49-50 vote on Sept. 15. That vote preceded the CFTC’s proposal but does not establish a connection between the Senate action and the agency’s notice.

The proposal continues the CFTC’s development of crypto-market rules under existing law. The next concrete step is the opening of the Federal Register comment period, followed by the agency’s review of submissions.