Enforcement Risk: The Long Length of the CFTC’s Reach

The Commodity Futures Trading Commission (CFTC) recently garnered attention by announcing two settled cases involving the agency’s jurisdiction over bitcoin products. While these cases focused attention on the status of digital currency as a “commodity” under the jurisdiction of the CFTC, they also serve as an important reminder that, under the Commodity Exchange Act (CEA), CFTC rules and enforcement powers are extensive and cover derivative instruments, “swaps” and “futures” on nearly anything, from a physical “thing” such as wheat or coal, to a virtual financial instrument. This means that the possibility of CFTC regulatory requirements and regulatory risk now needs to be considered when dealing with a product or transaction that has characteristics of a derivative instrument. This realization may be particularly jarring for those who are newly subject to CFTC regulation due to the expansion of its jurisdiction to cover swaps as a result of Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).