Policy Shift by CFTC
In a significant policy shift, Acting Chairman Caroline D. Pham of the Commodity Futures Trading Commission (CFTC) has expressed her support for the Department of Justice’s (DOJ) recent initiative to end the contentious practice of regulating the digital asset sector through prosecution. Pham has instructed CFTC personnel to align their enforcement practices with the DOJ’s newly established priorities, which involve holding offenders accountable while enabling a clear regulatory framework conducive to innovation.
Focus on Fraud and Innovation
This move by the DOJ comes at a time when the CFTC, under Pham’s leadership, is also redirecting its focus towards combating fraud and manipulation rather than merely prosecuting regulatory infractions in the digital asset space. Pham articulated her concerns about the damaging effects that aggressive enforcement strategies from various federal agencies have had on digital asset innovators, leading to an environment fraught with unfairness and uncertainty.
“For far too long, lawfare from multiple federal agencies against innovators in the digital asset space has created unfairness and uncertainty that has undermined trust in the regulatory process and impeded American competitiveness.”
Guidelines for Enforcement
Her directive emphasizes compliance with Executive Order 14219, which mandates that the CFTC staff and its Director of Enforcement should utilize their discretion judiciously and refrain from pursuing charges against digital asset cases unless there is clear evidence of willful violations by the accused concerning licensing requirements. This aligns with the DOJ’s memorandum, titled Ending Regulation by Prosecution, issued on April 7, 2025.
Resource Allocation and Strategy Redirection
In a strategic departure from previous enforcement practices, Pham has called for the reduction of the agency’s resources devoted to prosecuting registration requirement violations under the Commodity Exchange Act, unless such violations involve defendants’ awareness of their misconduct. This is crucial for the CFTC to conserve its limited enforcement resources and focus on more pressing issues, including aiding victims of fraudulent activities.
Enhanced Operations and Industry Collaboration
Furthermore, as part of her initiative to enhance CFTC operations, Pham has reassigned the responsibilities of the Division of Enforcement to prioritize the fight against fraud and the welfare of victims over reactionary enforcement tactics. This includes an advisory promoting voluntary reporting, collaboration, and remedial actions from industry participants.
To tackle a backlog of compliance issues that do not harm consumers or disrupt markets, she has implemented measures aimed at expediting resolutions, an effort that has already garnered interest from around two dozen firms.
Conclusion
Acting Chairman Pham’s recent actions represent a distinct shift in the regulatory landscape, signaling a more collaborative approach toward the rapidly evolving digital asset industry while emphasizing the importance of maintaining lawfulness and integrity in enforcement practices.
