Better Markets stated that the CFTC is "not the right regulator" for retail client crypto asset transactions and that the framework proposed by the commission would leave investors with weaker protections. The statement followed the CFTC's request on Monday for public comments on a potential framework for margin, credit, or financed retail crypto transactions within its existing authority.

Better Markets: CFTC Lacks Investor Protection Mandate

Benjamin Schiffrin, Director of Securities Policy at Better Markets, said that CFTC oversight is less suited to protecting retail investors than SEC oversight. According to him, "unlike the SEC, the CFTC does not have a mandate to protect investors," and its rules do not provide the same level of safeguards as those applied to securities trading under SEC supervision.

Debate Over Authority and Affiliation Risks

Better Markets challenged the claim that Congress intended for the CFTC to oversee such retail crypto transactions. Schiffrin noted that the provision cited by the CFTC was originally enacted to address fraud in the precious metals credit market, and in his view, this does not support the CFTC's role as the primary regulator of retail crypto. He also criticized the proposed framework for potentially allowing affiliations between market participants—a factor that Better Markets believes contributed to the collapse of FTX.

Criticism of Goal to Make the U.S. a 'Crypto Capital'

Schiffrin criticized statements by CFTC Chair Mike Selig about making the U.S. the "crypto capital of the world," saying it was not explained why this would be beneficial, and drew a sharp analogy to being the "capital of cocaine production." He also argued that the crypto industry "still lacks a real use case and is used either for speculation or for criminal purposes."

CFTC and SEC Continue Steps Without CLARITY Act

Better Markets' criticism comes as the CFTC and SEC advance crypto policy under existing law following the stalling of the CLARITY Act in Congress. The CFTC's proposed framework includes the idea of a new federal category for crypto platforms, which would bring relevant exchanges directly under the commission's supervision. Meanwhile, the SEC has proposed easing some custody rules for investment advisers, allowed limited trading of tokenized U.S. stocks, and issued new guidance on the application of securities laws to crypto assets. Nate Geraci, President of NovaDius Wealth Management, countered that the industry needs clear rules, and in the absence of legislation, these may need to be developed by the CFTC and SEC.