Keynotes and speeches can help us understand better the SEC/CFTC legal language

example 1 – what does the CFTC regulates?

As most everyone here knows, the CFTC does not regulate commodities.  So, any pronouncement that an asset is a commodity should not be interpreted as a roadmap to the CFTC for regulatory oversight. Unfortunately, far too many of those seeking to genuinely innovate in this space, and those looking to participate in this space, have been misinformed as to this point. I am trying my best to level-set and correct the proliferation of this misinformation. I want to be very clear that the CFTC regulates derivatives – we are specifically charged by Congress to regulate futures and swaps  – many of which have commodities as their underlying assets, but we do not regulate the underlying commodities themselves. 

For example, natural gas is a commodity, and the CFTC regulates futures contracts and swaps on natural gas. But the CFTC does not regulate the transmission and sale of natural gas for resale in interstate commerce. Rather, that is left to the Federal Energy Regulatory Commission.

While the SEC does regulate securities (and I will leave it to them to hash out what qualifies as a security), the CFTC regulates derivatives, not commodities. That said, the derivatives we regulate include some derivatives on securities.

Example 2 – is DeFi needs to be regulated?

Sometimes, people focus on labels. For example, we hear terms like “decentralized finance” (DeFi), “currency,” or “peer-to-peer lending.” It can seem easy to take these words at face value.

Make no mistake: regardless of the label or purported mission, we will be looking at the economic realities of a given product or arrangement to determine whether it complies with the securities laws.

History tells us that when a group of people try to mask the underlying economic realities of a certain product or instrument, investors can get hurt. Further, their pain can spread from the financial system to the real economy.

It helpful to follow, in a way it is a more simple translation of the law.

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