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Derivatives Download

What You Should Know About the CFTC, Part 2: Enforcement

October 08, 2025

By Michael L. Spafford,Patricia Liverpooland Paige Rinderer

In this issue of the Derivatives Download, we provide an overview of the CFTC’s enforcement authority.

The CFTC Has Broad Enforcement Authority

The CFTC’s enforcement authority is exercised through its Division of Enforcement (DOE), which is empowered with broad authority to investigate and pursue violations of the Commodity Exchange Act (CEA). This authority largely falls into three categories and has been aided by a key partnership.

The first category involves failure to register with the CFTC or comply with disclosure or other requirements imposed on registered entities (e.g., failure to report transactions to the CFTC, maintain required records or comply with core principles). The recent DeFi enforcement actions are examples. Although a small number of the DeFi products involved swaps or margined spot contracts, DOE alleged the DeFi protocols were required to register as Futures Commission Merchants (FCMs) for margin contracts or Swaps Execution Facilities (SEFs) for swaps. The principal goal appears to have been to send a strong message that all DeFi protocols offering similar products must register and implement effective KYC/CIP measures similar to those required by the Bank Secrecy Act. Other examples involve the CFTC’s pursuit of a registrant’s failure to capture off-channel communications and other violations of the CFTC’s Business Conduct Standards.

Second, the CFTC has broad anti-fraud authority over the spot and derivative markets. CEA Section 6(c)(1) was patterned after SEC Exchange Act Section 10(b) and provides that “[i]t shall be unlawful for any person, directly or indirectly, to use or employ, or attempt to use or employ, in connection with … a contract of sale of any commodity in interstate commerce . . . any manipulative or deceptive device or contrivance, in contravention of such rules and regulations as the [CFTC] shall promulgate.” CFTC Rule 180.1 prohibits not only false or misleading statements of material facts but also the use (or attempted use) of manipulative devices, schemes or artifices to defraud, and other acts, practices or courses of business that operate (or would operate) as a fraud or deceit on others. This of course includes marketing and sales fraud, but it also prohibits a broad range of behavior, including disruptive market practices (such as spoofing or wash trades), misuse of confidential nonpublic information, frontrunning and other misleading or deceptive acts.

The third category consists of DOE’s traditional anti-manipulation authority, now codified in CFTC Rule 180.2, which principally governs actions or practices designed to manipulate prices. This includes conduct traditionally described as a corner, squeeze or other exercises (or attempted exercises) of market power that create artificial prices (i.e., prices created through means other than the natural laws of supply and demand).

Many violations of the CEA are not only civil but also criminal, a fact that has led to significant cooperation between DOE and the Fraud Section of the Department of Justice (DOJ), as well as certain U.S. attorneys’ offices (principally the Southern District of New York and the Northern District of Illinois). In recent years, the DOE has focused on a combination of criminal prosecution and regulatory enforcement. This is best exemplified by the recent spoofing and frontrunning cases jointly brought by DOJ (criminal indictments and pleas) and CFTC (civil money penalty actions) and the increasing focus on money laundering, sanctions and foreign bribery.

Under Acting Chair Caroline Pham, the CFTC has shifted away from enforcement. DOE has been reorganized and its management streamlined to focus on victims of fraud, rather than on nonfraud violations such as recordkeeping or registration failures. Further, Acting Chair Pham has requested that the DOE not charge regulatory violations involving digital assets, including registration requirements, unless there is evidence that the participant knew of the requirement and violated it willingly. Instead, the CFTC has placed more emphasis on the examination process and remediation. The recent Enforcement Advisory on Self-Reporting, Cooperation, and Remediation, which rescinds prior guidance, offers more substantial credit for self-reporting, cooperation and remediation activities. It also seems clear that the CFTC’s historic cooperation with DOJ will be much more limited and more targeted under the new administration.

Bottomline: Although the robust CFTC enforcement structure demands careful consideration and planning by market participants seeking to participate in the U.S. markets and minimize their risks, recent developments may provide relief for violations that do not involve fraud, as well as for participants who self-report, cooperate and remediate their conduct.

The Supreme Court Weighs In: Jarkesy, Moab and Corner Post

Some recent Supreme Court decisions have implications for how, when and in what forum enforcement actions will be pursued and litigated in the future. The principles underlying those decisions also may have broader application.

In SEC v. Jarkesy, the Court held that the Seventh Amendment jury trial right extends to statutory claims seeking legal remedies (such as civil monetary penalties) based on common law causes of action such as fraud or manipulation. Although the agency has the power to pursue enforcement administratively, and historically has done so, the CFTC since Enron has routinely asserted its fraud and manipulation claims in federal court, a practice that aligns with Jarkesy. One area to watch, however, is the potential application of Jarkesy to SROs or SRO-like entities (such as DCMs or DCOs) that exercise delegated CFTC investigative and enforcement powers and seek to impose fines for fraud or manipulation. Another area is the demarcation between legal and equitable remedies. Can an administrative proceeding before CFTC hearing officers seeking only equitable relief requiring an entity to register as an FCM avoid the dictates of Jarkesy? Some CFTC commissioners have questioned this approach. More fundamentally, Jarkesy signals that any use of administrative procedures will face heightened scrutiny.

Relying on the statutory text, the Court in Macquarie Infrastructure v. Moab Partners held that pure omissions (where a speaker says nothing) are not actionable under SEC Rule 10b-5. Because it mimics the language of Rule 10b-5, the ruling effectively limits CFTC Rule 180.1 to alleged falsehoods or half-truths — “representation[s] that state the truth only so far as it goes, while omitting critical qualifying information.” Silence absent a duty to disclose is not misleading and therefore not actionable under Rule 180.1.

In Corner Post v. Board of Governors of Federal Reserve, the Court reiterated the common law principle that “no cause of action accrues until the loss or damage occurs.” In the context of an Administrative Procedures Act (APA) proceeding challenging an agency’s right to charge statutory interchange fees, the Court found that the cause of action accrued when the plaintiff was injured by the final agency action. Applying this principle in the context of a legal action where a jury trial right attaches, however, the cause of action indisputably accrues when someone is injured by the alleged fraud or manipulation, not when the federal agency decides to sue. The Court previously held that, in actions seeking penalties, the injury occurs when a third party is misled or deceived to their detriment.

One unifying theme in Jarkesy, Moab and Corner Post is the presence of common law terms in the statutes being interpreted. As the Court in Jarkesy stated, “[w]hen Congress transplants a common-law term, the old soil comes with it,” and the common law principles governing that term are incorporated into and limit the application of the federal statute. Fraud and manipulation are common law terms that bring a lot of “old soil” with them. At common law, fraud required proof of a statement or action that deceives another person who is harmed as a result, while manipulation prohibited acts that “artificially affect prices in order to mislead others.” Both common law terms are integral parts of and therefore define the scope of Rule 180.1. The CFTC has argued that Rule 180.1 captures benign conduct where there is proof of fraudulent intent, but the common law terms require more than that — i.e., deceptive conduct that actually harms others.

Bottomline: These decisions will reverberate and echo through the lower courts as they are interpreted and applied in different contexts, but it seems clear that they will present challenges for CFTC enforcement (and litigation) in the future.

Whistleblowers Increasingly Are the Primary Source of CFTC Investigations

Over 40% of the CFTC’s recent enforcement actions have stemmed from whistleblowers. Since the first whistleblower award in 2014, the CFTC actions arising from whistleblower tips have resulted in monetary sanctions totaling nearly $3.2 billion with whistleblowers receiving awards totaling approximately $390 million, according to the CFTC’s 2024 annual report. Under the whistleblower program, individuals who voluntarily report original information relating to possible CEA violations may receive 10% to 30% of the monetary sanctions, if qualifying information leads to a successful enforcement action. In announcing such awards, the CFTC has indicated that an individual does not have to be an insider to receive an award. In fact, whistleblowers have provided information through independent analysis of market data or third-party evidence. The CFTC also can issue awards to whistleblowers based on related actions from other regulators, including similar programs implemented by the SEC and DOJ. The CFTC has coordinated and worked closely with other regulators to investigate whistleblower information, when necessary.

The number of tips from whistleblowers has consistently increased and is likely to increase further, given the large incentives and increasing publicity of the whistleblower program as well as the existence of a cottage industry of lawyers advising whistleblowers. While stricter rules exist for awards issued to compliance professionals, the CFTC also has made it a point to promote the availability of awards to compliance professionals and other insiders.

The CFTC is very protective of whistleblowers and has pursued market participants for retaliation or restrictions that chill an employee’s right to bring matters to the attention of regulators like the CFTC. In a recent enforcement action, the CFTC sanctioned a company for failing to include carve-outs for whistleblowers in confidentiality clauses included in its employment agreements. This approach appears to mimic the position of the SEC, which has aggressively pursued similar failures in other contracts as well.

Bottomline: Whistleblowers are an important part of the enforcement landscape and likely to be present (and must be considered) in most investigation or enforcement matters. The prevalence of whistleblowers puts a priority on handling internal complaints and perceived whistleblowers carefully, in a manner that promotes internal reporting, independent investigation and, where necessary, remediation without regulatory involvement.

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Practice Areas

Fintech

Futures & Derivatives and Trading

Investigations and White Collar Defense

Private Equity


For More Information

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Jaime Madell

Partner, Corporate Department

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Renato Mariotti

Partner, Litigation Department

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Michael L. Spafford

Partner, Litigation Department

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Patricia Liverpool

Associate, Litigation Department

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Paige Rinderer

Associate, Litigation Department