Authored by: Daniel J. Chirlin, Diana Y. Lee, Edward W. Dunn and Grant Whitney

In 2018, the Commodity Futures Trading Commission (“CFTC” or the “Commission”) Chairman J. Christopher Giancarlo continued to pursue his new enforcement priorities under the watchful guidance of Commission Director of Enforcement James McDonald. The CFTC also welcomed two new Commissioners in August 2018, after the U.S. Senate confirmed Dan Berkowitz and Dawn Stump, bringing its governing body to a full five-person panel for the first time in four years. Chairman Giancarlo has signaled several new initiatives for the Commissioners to pursue in the coming months, which, if implemented, could have a significant impact on the CFTC’s enforcement regime. The Chairman’s agenda includes: a focus on cross-border enforcement, with an emphasis on territorial priority (e.g., regulation of trades arranged, negotiated, and executed in the U.S. by non-U.S. dealers); asserting regulatory authority over the emerging cryptocurrency market; strengthening its cooperation program and its coordinated enforcement with self-regulatory organizations (“SROs”); and completing unfinished regulatory reforms, particularly with respect to trade execution. Many of these agenda items are also consistent with the CFTC’s new task forces, which specialize in four areas: spoofing and manipulative trading, virtual currency, insider trading and protection of confidential information, and the Bank Secrecy Act.

In many ways, 2018 was a banner year for the CFTC and its new Commissioners. Already with a full year under his belt, Chairman Giancarlo began pursuing some of his initiatives from 2017 in earnest. One of those initiatives was Project KISS (“Keep it Simple Stupid”)—an agency-wide review of the CFTC’s rules, regulations, and practices aimed at making them simpler, less burdensome, and less costly. The CFTC also enjoyed great success in its ongoing fight to obtain jurisdiction over virtual currency, receiving favorable rulings from several federal courts that found virtual currencies that are commodities under the jurisdiction of the CFTC. The CFTC also continued to pursue enforcement actions for manipulative conduct and spoofing, largely successfully. However, at the same time, the CFTC suffered a few setbacks, particularly concerning market manipulation with decisions from federal judges that undercut the CFTC’s theories and scope of authority.

The SROs saw a noticeable uptick in their coordination with the CFTC, bringing several significant parallel actions as part of the “cooperation enforcement” initiative launched at the beginning of FY 2018. In a number of cases, the CFTC’s enforcement actions stemmed from referrals from SROs.

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