Law of Code #114 - CFTC Regulation of Crypto with Michael Frisch
Sep 7, 2023
Michael Frisch, a partner at Croke Fairchild Morgan & Beres and former CFTC attorney, shares insights from his extensive experience in crypto regulation. He discusses the CFTC's historical role in regulating cryptocurrencies like Bitcoin and Ethereum, the complexities of derivatives, and the significance of Coinbase's FCM registration. Michael contrasts the CFTC's pro-innovation stance with the SEC's enforcement-focused approach and offers predictions on the future landscape of crypto regulation, emphasizing the importance of fostering innovation in the space.
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How A Case Sparked A Crypto Journey
- Michael Frisch first encountered Bitcoin when he was handed a Bitfinex investigation at the CFTC in 2015.
- He learned crypto by writing a foundational memo titled "What is Bitcoin?" for his supervisors.
CFTC vs SEC: Distinct Jurisdictional Roles
- The SEC covers securities while the CFTC regulates derivatives like futures, options, swaps, and some retail commodity transactions.
- Spot commodity trades (e.g., buying Bitcoin for cash) are not subject to CFTC registration rules, though fraud/manipulation claims still apply.
Most Fungible Tokens Are Commodities
- The CFTC treats most fungible digital assets like Bitcoin and Ethereum as commodities, partly because futures exist on them.
- NFTs and non-fungible items are much harder for the CFTC to claim as commodities.